Could a bankruptcy filing by a small automotive supplier spark a catastrophe? That's a question posed by Edward Lapham, executive editor at sister publication Automotive News, in his "Just Between Us" blog. Lapham compares the complicated partnerships and other relationships among automakers and suppliers to the treaties that helped push Europe into World War I:
Remember that a century ago things were so entwined in Europe that the June 28, 1914, assassination of Archduke Franz Ferdinand, heir to the Austro-Hungarian throne, touched off the First World War. The archduke and his wife were killed in Sarajevo by a Bosnian. But that was incidental. It could have happened anywhere. Now, with so many suppliers at the tipping point of insolvency, a Chapter 11 filing by a small but well-connected supplier could plunge the North American auto industry into a chain reaction of bankruptcies and massive financial disruption.Interesting question. From the suppliers' point of view, they're probably more concerned with what would happen to them if General Motors, Chrysler or a big Tier 1 supplier files for bankruptcy (see Plastech Engineered Products Inc. for a recent example). Could problems at a a small company create a similar problem? I guess that depends on how the supply chains are connected.