More US leaders agree: Supplier consolidation is necessary

ERJ staff report (R&PN)

Detroit, Michigan -- Don Walker isn't shedding tears that the White House shot down a request last week for $8 billion to $10 billion in aid for parts suppliers.

Magna International Inc.'s co-CEO said a supplier shakeout is inevitable-and the sooner it begins, the sooner it will be over.

That echoes comments by other industry leaders that a shakeout is starting and that the federal government should not try to prevent it.

Last week in Detroit at the National Summit, a forum sponsored by the Detroit Economic Club, Walker said the governments of the U.S. and Canada have helped suppliers indirectly by providing aid to General Motors Corp. and Chrysler L.L.C.-and that's enough.

“The government should support the assembly plants, the car companies, so everybody has a fighting chance,” Walker said. “Beyond that, you have to let nature take its course.

“The supply industry has to be thinned out, and the car companies are trying to do it anyway. So it just accelerates this.”

US supplier trade organisations want more federal assistance. But, like Walker, other industry leaders are treating supplier failures as unavoidable.

Last week, Ford Motor Co. CEO Alan Mulally said, “The most important thing that we do now is help them consolidate because we have this overcapacity.”

Speaking after the National Summit, Mulally said auto makers are working together to keep critical parts flowing.

Tim Leuliette, CEO of Dura Automotive Systems Inc., said auto makers are shifting work from failing companies to healthier suppliers. “We've had two situations in Europe, for example, where customers have come to us and said, 'We have this business, there are no other suppliers.' We're seeing this consolidation take place.”

Neil De Koker, president of the Original Equipment Suppliers Association, said more aid is needed to help suppliers get through a business drought caused by the bankruptcies of GM and Chrysler. The association says hundreds of suppliers might slide into bankruptcy.

But the Obama administration isn't buying the arguments.

From Tire Business (A Crain publication)