Government, Automaker Aid Keeps Parts Makers Alive

Suppliers already were hurting when the U.S. auto market went into a funk starting last year, dropping to an annual selling rate of around 9 million after peaking at 17 million in mid-decade.

Many thought the whole system would collapse because the automakers would be unable to keep making payments, but government cash infusions and payment guarantees for GM and Chrysler kept most suppliers afloat, said Dave Andrea, vice president of industry analysis and economics for the Original Equipment Suppliers Association.

Before filing for bankruptcy, GM made payments to suppliers early, which also helped cash-strapped companies avoid trouble, Andrea said.

Now, though, many are at risk of trouble again with GM and Chrysler temporarily shutting down some factories for up to three months due to growing inventories. If the factories aren't running, suppliers have no income, and there's a 45-day lag between when they ship parts and when they are paid again.

"It isn't over yet," said Bob McKenna, president of the Motor Equipment Manufacturers Association, another industry trade group.

Both Visteon Corp., once a unit of Ford Motor Co. and still that company's biggest supplier, and Metaldyne Corp. already have filed for Chapter 11. Barclays analyst Brian Johnson said in a note to investors Monday that Lear Corp., which already has missed interest payments, is vulnerable for a bankruptcy protection filing by June 30.