U.S. Auto-Parts Suppliers Seek $18.5 Billion

[jsharp]

Feb. 13 (Bloomberg) -- U.S. auto-parts suppliers, struggling with losses as sales dwindle, made a formal request for about $18.5 billion in aid to the U.S. Treasury Department. Parts suppliers are seeking aid after automakers cut production in the U.S. to a near-halt in the last weeks of December and into January because of plunging sales. About one- third of suppliers are in “imminent financial distress” and another third indicated they may reach that point during this quarter, MEMA said, citing industry surveys. http://www.bloomberg.com/apps/news?pid=20601087&sid=a2kCgioq69J0&refer=home $18.5 Billion. I know, it doesn't sound like much in these days of Trillion $$ legislative bills that no bothers to read. But lets see what we can buy if we want to spend that kind of cash on the auto industry. Johnson Controls - Market cap $8.1 Billion American Axle - Market cap $53 Million. Great, we have lots of money left from that $18.5 Billion. Might as well spend it on - GM - Market cap $1.5 Billion Ford - Market cap $4.2 Billion. We'd still have $4.6 Billion left from our original $18.5B Think Cerebus would let Chrysler go for that? They paid $7.4B for 80% of it 2 years ago but given their current situation, they might be smart to sell. I've no doubt that the suppliers will get their $18.5B and the others at the trough will get whatever they ask for next week. But looking at the numbers, I'm not seeing the financial sense here. Maybe I'm drinking the wrong flavor Kool-Aid?

 

[peterdaniel]

What shocks me is how fragile these companies are. Did no one ever plan for a rainy day? Do they have NO savings whatsoever?? Whatever happened to the billions in profits they were making??

 

[wog]

they give the money to ceo and board of the directionless

 

[StevieC]

 Originally Posted By: peterdaniel

What shocks me is how fragile these companies are. Did no one ever plan for a rainy day? Do they have NO savings whatsoever?? Whatever happened to the billions in profits they were making??

Why consumers didn't and bought houses and cars they couldn't afford... It's the North American way... The money train will never run out!

 

[MC5W20]

 Originally Posted By: wog

they give the money to ceo and board of the directionless

You forgot to mention the employees. We used to get profit sharing when my company made money. A lot of you guys are clueless to the auto industry.

 

[jsharp]

 Originally Posted By: MC5W20

 Originally Posted By: wog

they give the money to ceo and board of the directionless

You forgot to mention the employees. We used to get profit sharing when my company made money. A lot of you guys are clueless to the auto industry.

No, a lot of us have said repeatedly that every employee in these companies, both past and present, union and non-union, have helped to run them into the ground. You might have missed it though.

 

[wapacz]

imports get parts from these suppliers also. I am not sure any company can do well with a 30 to 50% drop in sales over a period of just months.

 

[jsharp]

 Originally Posted By: wapacz

imports get parts from these suppliers also. I am not sure any company can do well with a 30 to 50% drop in sales over a period of just months.

It certainly would have helped had they not been up to their eyeballs in debt and teetering on the brink of bankruptcy before that point.

 

[jsharp]

 Originally Posted By: wapacz

imports get parts from these suppliers also. I am not sure any company can do well with a 30 to 50% drop in sales over a period of just months.

Couldn't edit my last post because it took too long for me to find this - Auto production last year declined by roughly 25%. That looks good compared to 1932, when production shriveled by 90%. The failure of a couple of dozen banks in 2008 just doesn't compare to over 10,000 bank failures in 1933, or even the 3,000-plus bank (Savings & Loan) failures in 1987-88. Stockholders can take some solace from the fact that the recent stock market debacle doesn't come close to the 90% devaluation of the early 1930s. http://online.wsj.com/article/SB123457303244386495.html?mod=djemEditorialPage It's certainly different now but it's not because times are tougher.

 

[Shannow]

 Originally Posted By: peterdaniel

What shocks me is how fragile these companies are. Did no one ever plan for a rainy day? Do they have NO savings whatsoever?? Whatever happened to the billions in profits they were making??

It's part of the US model of doing business, borrow for your expenses, and make it a tax deduction. One of our senior management did a review of US power generation, and found that they borrow heavily for every aspect of their operation, relying heavily on credit to keep the bills being paid...shifts the balance sheet more favourably for taxation. When the credit dries up, they can't stay afloat. This is apparent too in agriculture, with the money for seed, fertiliser and fuel for this year's crops being borrowed...except in the credit crunch, no-one is lending to any risky venture (which agriculture certainly is).

 

[Steve S]

 Originally Posted By: StevieC

 Originally Posted By: peterdaniel

What shocks me is how fragile these companies are. Did no one ever plan for a rainy day? Do they have NO savings whatsoever?? Whatever happened to the billions in profits they were making??

Why consumers didn't and bought houses and cars they couldn't afford... It's the North American way... The money train will never run out!

Then the dumb taxpayers bail the poorly run companies out.

 

[Propflux01]

Hey! Everyone else gets a bailout, where is mine???

 

[Gary Allan]

Now people are finally figuring out how wrapped around the auto industry our entire economy is. Coming to a person near you...the ripple effects.

 

[oilyriser]

What are they gonna do with all those parts they make if they get a bailout but there aren't any car makers demanding the parts? Might as well start building a Pyramid.

 

[Shannow]

It's why I think the thing should have been let fall in the first place. Can't prop up the car makers without propping up the people who now can't sell stuff to them. It's harsh, but I've seen a few firms go into receivership in the last year. An orderly receivership, and the administrators seem to mine what worth exists in the carcass. Then rebirths into something else, at bargain basement price for the new owners. The ones I've seen, only 5-10% lose their jobs in the very short terms (weeks), and all the front line keep their jobs, minus their accumulated leave, which they are usually forced to take off during the receivership phase. Prop up the car manufacturers, with nothing to sell, and you just drag out the pain to their suppliers.

 

[yeti]

Now people are finally figuring out how wrapped around the auto industry our entire economy is. Coming to a person near you...the ripple effects. _________________________ gary -- once again, you're letting logic and fact get in the way of a good discussion. where is your mind, man ? all the more reason why the auto industry has to "subsidized" (call it what you want -- it's all semantics). the u.s. and canadian governments have "subsidized" the farming,steel,airline & timber/softwood industries for many years, yet there was minimal *itching about their subsidies. like it or not, these things HAVE to be done. in a perfect world there would be no farming subsidies, for example, but where would the industry be now ? the same goes for the manufacturing industries mentioned. gary mentions ripple effects -- it just recently started to hit the white collar people. i don't understand why, but many think that they're immune to job losses. i know of a few, locally, who recently lost their jobs. the people who know them could care less, as they think that their *hit doesn't stink because they wear a tie to work, and that their sheepskins would shield them from realities such as this. this is a big wakeup call, as ripple effects will hit many -- blue and white collar. have a good day, people, and enjoy the daytona.

 

[oilyriser]

There are many jobs to do, but all the good workers are tied up in the old industries that should have been allowed to fail. Build more energy efficient homes. It takes more work. Build more ground source heat pumps. But that takes the kind of skilled people now tied up in the auto manufacturers. Design a better power grid. Can't do that because of all the brainy types tied up working in the banks that got bailed out. Microsoft was petitioning congress to let in more immigrant workers because there was a shortage of competent programmers. Maybe AIG should have shed a few decent programmers, and we could have a better OS.

 

[yeti]

oily -- good points, especially the geothermal one. this is the future of heating systems, but it's still in its infancy stage.

 

[jsharp]

Unemployment is heading up. There's no shortage of labor in green industries. What there is a shortage of is economically viable products. That's why there aren't more people employed in those industries. Green housing? We have something like 19 million homes sitting empty right now. More housing the last thing we need. MS wants H1B's for one reason only - $$

 

[opus1]

 Originally Posted By: jsharp

..... MS wants H1B's for one reason only - $$

Bingo! Truth be told, I'm surprised MS is even bothering bringing anyone here. I would imagine that they have set up shop in Bangalore and can hire people there cheaper....