When Key Plastics LLC recently filed for Chapter 11 bankruptcy protection, one might have imagined the news reverberated through the company like a shockwave. Not so.
The auto parts manufacturer, which runs 25 facilities across the globe and builds everything from brake parts to door handle assemblies, was able to file for a soft-landing bankruptcy as a result of its abundant resources. Minnesota-based Wayzata Investment Partners became the company's controlling stockholder and infused $20 million in cash.
Hardly anyone's lives were disrupted.
However, Key Plastics LLC is the exception to the rule. Other suppliers aren't nearly so well off in a quickly deteriorating environment for the nation's auto suppliers.
For all the attention drawn by the U.S. government's bailout of General Motors and Chrysler, auto suppliers employ more than twice as many workers as do carmakers. In addition, like Detroit's Big Three, they are running out of money.
General Motors, Ford, and Chrysler owe some 3,000 suppliers an estimated $13 billion, according to Nell De Koker, chief executive of the Original Equipment Suppliers Association in Troy, MI., a trade group that represents auto suppliers.
Many of these companies in the $240 billion business are surviving by using IOUs from the automakers for parts already delivered as collateral for bank loans.
"We have suppliers in the very same shape as General Motors and Chrysler," De Koker said. "They don't have access to capital."
Nor do suppliers have the same margin for error as the Big Three. If suppliers, both large and small, file for bankruptcy, the flow of parts to every automaker in the United States--both domestic and foreign--would be disrupted.
"Many of the small suppliers will simply liquidate," warned John Casesa, principal in the auto consulting firm Casesa Shapiro Group...