Tuesday, May 17, 2005


Supplier Problems Start To Receive More Attention

While The Car Connection devotes a pair of posts to the troubles in the auto component industry - one focused on the problems at Collins & Aikman and Visteon, and the rising fortune of Bosch, with the other primarily dealing with Delphi's considerable problems - another interesting article on the usual suspects from Ashby Jones hits the pages of Yahoo!.

The Jones piece is not what we'd call uplifting, with its prediction of immnent bankruptcy filing for C&A, and an underlying theme of doom-and-gloom for Delphi and Visteon. What makes the piece worthy of comment, however, is this observation:

Perhaps more compelling is that a bankruptcy filing by Visteon, a Ford spinoff, would hurt its former parent more than the company itself. Hoselton noted that because of a glut of restrictive employment contracts between Ford and Visteon, "it would cost Ford more to pay for Visteon's bankruptcy than it would for Ford to keep propping up the company for a while. Visteon's union obligations wouldn't go away. They'd just shift to Ford."

If that indeed is the case, then it'll be interesting to see how long Ford can afford to keep Visteon afloat. I'm going to take a wild guess and say that similar employment contracts are in place at Delphi, which would then place the same burden on GM if their spin-off takes a nosedive.

None of this strikes me as particularly smart business, but I imagine things looked much different in 1999.

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