 |
||||||
| Sunday, March 21, 2010 |
Contact Us
|
 RSS
|
|||||
|
|
| |
|||
|
||||||
|
||||||
|
|
ANALYSIS
March 2, 2009
Sagging Index no longer reflects what’s going on in the market, some say, Replacements? Google it, to start.
March 2, 2009
Downward price spiral will actually boost the cost of capital for most companies. CFOS, take note.
March 2, 2009
The latest bailout at AIG could be a preview of how the president will deal with Wall Street.
March 2, 2009
No corporate defaults. Big debt offerings. Percolating CP issuance. Things may be looking up in the capital markets.
|
|
|
|
November 15, 2008 12:01 AM ET
(Automotive News)—General Motors and its suppliers are performing a death-defying trapeze act. And suppliers’ insurance companies are rolling up the net. If GM files for Chapter 11 reorganization, it will drag its suppliers down, too. On the other hand, suppliers are in a position to drive the automaker into bankruptcy. GM owes its suppliers $3 billion to $7 billion for parts in any given month, according to calculations by Automotive News. Say nervous suppliers were to demand that GM pay cash on delivery for parts. If GM had to pay out even $3 billion tomorrow, its operating cash would drop below the $14 billion level it says is necessary to run the business on a day-to-day basis. Asked if he is seeking shorter payment terms from the Detroit 3, Gregg Sherrill, CEO of Tenneco Inc., of Lake Forest, Ill., said “We don’t think that’s the right way to go. You start doing that and pretty soon you push everyone over the cliff.” On Nov. 8, two top GM executives—Bo Andersson, group vice president for purchasing, and COO Fritz Henderson—held a conference call to reassure its 325 largest suppliers, says a supplier executive. Mr. Andersson has stepped up his meetings with individual suppliers as conditions have worsened. A GM bankruptcy could devastate a supply base left fragile from declining production volumes, higher raw material prices and tight credit. “We have a lot of exposure to the Detroit 3,” said Charles Hageman, vice president of the Forging Industry Association in Cleveland. “It they went out of business they would take a lot of our members’ revenue with them.” Marc Santucci, president of consulting firm Elm International Inc., of East Lansing, Mich., disputes the theory that supplier ranks would tumble if one of the Detroit 3 melt down—with a few notable exceptions, including American Axle & Manufacturing Holdings Inc., Delphi Corp. and Visteon Corp. Most other companies, he said, have enough nonautomotive business, or are nimble enough, to weather the storm. Those well diversified by region, customer and product lines include Johnson Controls Inc., Denso International America Inc. and Robert Bosch LLC. But survival assumes that suppliers get paid for the work they have delivered. Many have large obligations from buying tools, certifying parts and prototyping expenses. If they can’t recover their debts, they could be toast. The most immediate risk comes from the banking community, said turnaround expert John Groustra of Conway MacKenzie & Dunleavy, of suburban Detroit. He said banks would halt lending if a bankruptcy were imminent. “If they stop lending, it would bankrupt most suppliers. It’s doomsday.” Meanwhile, some suppliers that bought credit protection for their deliveries have had their insurance canceled. “My client got whacked by Euler Hermes ACI,” said Scott Eisenberg, managing partner with investment banking firm Amherst Partners LLC, of suburban Detroit. He said Euler Hermes, a Paris unit of insurer Allianz, canceled its trade credit insurance as the client, an injection molder supplying mostly Asian companies, came under pressure from higher-priced raw materials and falling volumes. Rick Ostopowicz, a spokesman for Euler Hermes, said, “Buyers with riskier grades have their coverage severely reduced or canceled.” Great Britain’s Financial Times newspaper reported today that Euler Hermes and two other large European credit insurers, which together control more than 80 percent of the world’s credit insurance market, are refusing to write policies for suppliers trading with GM or Ford Motor Co.
|
|
|
|
Latest News
• Reversal? Stanford advisers sue the SEC
March 5, 10:52 AM EST
• Third of companies not complying with new tax reporting rule
March 4, 4:25 PM EST
• Regulators aware of problems at First National for six years: audit
March 4, 3:31 PM EST
• Influential advisory group to look at fair-value, off-balance sheet accounting
March 4, 4:16 PM EST
• In a first, NY State hopes to sell bankrupt insurer
March 4, 3:59 PM EST
CRAIN'S BENEFITS OUTLOOK 2009
SPECIAL REPORT
MOST POPULAR
|
MORE ANALYSIS
Crain Financial Group:
InvestmentNews |
Pensions & Investments |
Workforce Management
Copyright ©2010 Crain Communications Inc
All rights reserved.
Privacy Policy |
Terms & Conditions