The discussions surrounding crashing auto industry has always focused on Detroit’s Big Three (General Motors, Ford, and Chrysler) that it had been quite unfair for the suppliers – the companies that work on the sidelines but are integral to the whole automaking industry.
There is plenty of reason for the government to aid these suppliers as well. With productions across companies grinding to a halt, these businesses are hit hard. Good thing the feds will be providing $5 billion to bailout these suppliers. Business Week reports:
Auto companies including GM and Chrysler have been hammering parts suppliers for lower prices over the last few years to lower their own costs. But suppliers calculate their profits based on an annualized vehicle selling rate, in many cases, of between 13 million and 15 million. The auto industry this year is selling at a rate of around 10 million, erasing even the skimpy profits the supplier companies were banking on
Data revealed that, because of the crunch, as many as 500 parts suppliers will be forced into liquidation in the next sixty days due to the lack of credit. The problem in itself is cyclic. Failure of key suppliers will also affect the production of the Big Three.
