Our sister newspaper Automotive News is reporting that the nine-week summer shutdown at most of General Motors' North American plants could bankrupt as many as 10 percent of GM's top 300 parts makers. The story attributes the prediction to "a source familiar with GM's thinking." According to the story, GM's top 300 suppliers ship more than 80 percent of the parts that go into GM vehicles. The company has a total of 1,500 parts suppliers. GM spokesman Dan Flores acknowledged that the shutdown will cause cash-flow problems at some suppliers. "We recognize these production cuts are going to be very painful, but the decision was required as we continue to bring our inventories in line with market demand," Flores said. The story also points out that the government's bailout for suppliers, as currently written, will not help GM suppliers during the shutdown. The program "allows designated suppliers to be paid quickly for parts already shipped and guarantees those payments even in a bankruptcy. But it only applies to suppliers that actually are shipping parts. If GM doesn't produce vehicles for nine weeks, no payments will be due -- hence, no government aid." Consider this a timely reminder that, despite some predictions that the economy is starting to improve, there might be some pretty big bumps in the road that we haven't reached yet. And don't forget, Jeff Mengel, a partner with Plante & Moran PLLC, said back in March that about 15 percent of North American plastics processors could enter bankruptcy liquidation over the next 18 months, with the worst of the problems this month and in May.
Will GM's summer shutdown cripple its suppliers?
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