Mustang Parts
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Friday, May 06, 2005

The Supplier Standoff

GM and Ford both buy many key parts from their former parts divisions, which they spun off as Delphi and Visteon.

Delphi and Visteon are in even worse financial condition than their parent companies. They also have their parents over a barrel: if Delphi and Visteon are unable to build certain parts, GM and Ford are unable to build cars.

GM and Ford may be forced to take back the money losing plants of the suppliers, to ensure the supplier's survival, to fulfill UAW contractual obligations, and to continue the flow of parts. Because these plants are unionized, they can not easily be closed, and the parts bought elsewhere.

At that point, the OEMs will have gotten back the chaff, and let the wheat go.

1 comment:

The Angry Engineer said...

It's a situation not unique to Delphi and/or Visteon:

Check out the financials of the top Tier 1 automotive suppliers - with extremely few exceptions, most are in deep doo-doo. And most could take down the majority of the auto production in the US if they suddenly went under. And yet suppliers are still treated like dirt by the OEMs.