The US auto industry continues to be in rough shape. Now word from GM that they are worried about the state of their supply base. (GM purchasing chief says supplier crisis not over, Automotive News, Oct 22)
My gut tells me we will face more troubled suppliers as volumes come back,” said Bob Socia, vice president of GM’s global purchasing and supply chain. “We have no indication it is behind us.”
Liquidity remains an issue. As we have posted on before, the anticipated shake out of the auto supplier base has yet to happen. Before GM and Chrysler went bankrupt there were the common themes that they had too many dealers and there were too many suppliers. The former has been addressed, the latter has not. It will be interesting to see how weak suppliers affect those firms going forward. Automotive News reports that GM is keeping a close eye on 140 to 150 suppliers.
Speaking of GM and Chrysler going bankrupt, Money‘s web site has a fascinating account of how that came about penned by Steven Rattner, a Wall Street guy brought in by the Obama administration to lead its attempt to revamp the auto industry. (The auto bailout: How we did it, Money, Oct 21. Also check out Tim De Chant’s posting over at Expertly Wrapped.) Here’s the money quote from that essay that everyone repeats:
Everyone knew Detroit’s reputation for insular, slow-moving cultures. Even by that low standard, I was shocked by the stunningly poor management that we found, particularly at GM, where we encountered, among other things, perhaps the weakest finance operation any of us had ever seen in a major company.
The stunning part of that quote is that Rick Wagoner, GM’s penultimate CEO, was a finance guy as was Jack Smith, the CEO before Wagoner.
Rattner has apparently gotten in touch with his inner Chatty Cathy. He also gave a speech that was covered in Automotive News (GM management had ‘lack of financial discipline,’ Rattner says, Oct 20). If you question the wisdom of the bailout, consider the following nugget:
With financial markets still frozen, both [Chrysler and GM] would have unquestionably run out of cash quickly, slid into bankruptcy, closed their doors and liquidated,” he said.
“That would have meant the elimination of more than two-thirds of American-owned auto manufacturing capability, cost more than a million jobs in the short run, dramatically deepened and prolonged the nationwide recession and pushed unemployment rates in several states above 20 percent.”
That said, I must confess that I still don’t understand the wisdom of Fiat buying into Chrysler (or the benefit of saving Chrysler in general). The only way I can see that deal making sense is if Fiat believes that there is money to be made off the Jeep brand internationally. I can’t imagine a reality in which Americans go to Chrysler looking for fuel efficient European inspired cars. There was a point at which Fiat was also in the mix to buy Opel and GM’s other European assets (which are now slated to go to Magna although that deal has had some troubles). If Fiat had been serious about that while making a run at Saturn which was selling US versions of Opel’s cars (Saturn was supposed to be Roger Penske’s toy before that fell through), I could see a strategy to build a small car business in the US. Chrysler doesn’t seem an easy way to do that. I would not be surprised if a few years from now, they fold Dodge’s pick ups into the Jeep brand and shut the rest down.