Lear-To File Next Week?
Today’s (June 26, 2009) Wall Street Journal reported that Lear Corp is preparing to file for bankruptcy protection as early as next week. This action would make Lear the eighth major auto parts supplier to file for Chapter 11, since Delphi filed in ‘05. A temporary production shutdown for Lear has ramifications well beyond their doors. As the world’s second largest auto seat supplier, a Lear shutdown could cause a variety of auto assembly plants to shutdown. An unsettling prospect to an already fragile US Auto Industry.
I found interesting that the Journal noted that Lear’s filing seemed more about aggressive restructuring than a cash crunch. In this past March, it was noted that Lear was sitting on approx. $1 billion in cash.
My worries surround the Tier 3 and Tier 4 suppliers to all of these major auto parts manufacturers. These smaller cash strapped companies have been absolutely hammered by the filings of these large suppliers. Additionally lenders seem increasingly focused on divesting their position in the automotive industry; causing additional pain. It is obvious from my perspective, more cash strapped participants in the auto supply chain will simply ’slip under the surface’ as this flood of bankruptcies continues.
Nonetheless, as bad as this sounds, it has been needed; a ‘culling of the herd.’ The remaining participants should have the needed strength to service and grow with their automotive customers. The reinvention of the US Auto Industry requires a strong supply base, without it, survival is not possible.
