Suppliers Not Making the Grade
May 18, 2007

More than a fifth of the world's auto suppliers are in danger of becoming "significantly distressed financially" over the next 12 months and a third of North American suppliers already are financially distressed, according to a survey released this week by consulting firm BBK.

BBK, a global business advisory firm best known for its turnaround projects with auto suppliers, studied 80 of the top 150 global auto suppliers and assigned a grade of A to F depending on a company's potential for problems over the next year. A grade below a B indicates some level of distress.

The study found:
· North American parts makers fared the worst, with 11 companies earning an F. North American companies are more in debt than their overseas counterparts;
· the average rating for North American suppliers was B-; the average for Europeans was B+; the average for Asian suppliers as A;
· 33 percent of North American suppliers were considered distressed; 14 percent of European suppliers; and no Asian suppliers.

"It is absolutely critical for OEMs and Tier 1 suppliers to take a comprehensive, proactive approach to carefully monitor both the operational and financial health of their suppliers," William Diehl, BBK’s CEO, told the Automotive News Manufacturing Conference this week. "If these companies are not proactively monitoring the health of their suppliers, they risk suffering a significant and costly disruption to their supply chain."

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