DETROIT (Oct. 23, 2009) — As production of new vehicles ramps up, the new purchasing chief for General Motors Co. is worried that his supply base is headed for still more financial trouble.
“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 continues to plague the auto industry and many suppliers are still in a weakened financial position, he said, unable to secure operating funds from banks and unable to shore up their worsening capital.
Mr. Socia's comments came during a phone interview with reporters about his first few months in the job. He took over in June when his predecessor, Bo Andersson, left GM to assume the chairman's job with Russian auto maker GAZ.
Supplier problems intensified when GM and Chrysler Group L.L.C. geared up production after two months of mostly quiet assembly plants. Suppliers struggled with ways to obtain cash to bridge the gap between the startup of parts production and the arrival of revenues—a gap that typically spans 45 to 60 days.
Mr. Socia said GM faces a serious challenge from its weakened supply base. “We have troubled waters in front of us for the next year. We are monitoring the supply base.”
GM has 140 to 150 troubled suppliers that he said the company is “keeping a close check on.”
Yet he was optimistic about some suppliers, such as Lear Corp., emerging from bankruptcy protection.
So far this year, at least 20 auto suppliers have sought protection in U.S. bankruptcy courts, according to research by Automotive News, a sister publication of Tire Business. But this figure doesn't include smaller companies and operations that went out of business without going into bankruptcy.