A Break In The Supply Chain

Many corporate organizations have felt the affect of the major changes to the economy that we have all been experiencing during this past year and non more so than the global automotive industry.

It was clearly apparent to a considerable number of people that the car manufactures were in desperate need of restructuring and had been for many decades.

When the credit crisis hit they had no choice but to try to withstand not only the financial affects, but also the cries for total restructuring of the industry.

The big three in the US approached the government looking for a bailout and after submitting, what was for some a very basic set of plans for the ongoing future of their respective companies, they were duly allocated temporary funds to try to keep them afloat.

GM and Chrysler were in a critical state and required the bailout urgently so that they could at least pay all their workforces and try to keep their businesses running at reduced production levels.

Ford on the other hand stated clearly that they did not require a bailout from the government at this moment in time and that they would self fund their business with partial restructuring measures.

Critics voiced their opinions and stated that it would be better to just let them fall and then they would be forced to do the restructuring that had been needed for so long.

The implications for thousands of suppliers to the automotive industry are enormous. If any or all of the big three were to file for bankruptcy it would be disastrous for all their suppliers.

And especially for the small to medium businesses that are completely reliant on the car manufacturers for their business survival.

It would in effect cause utter chaos, not just for the suppliers but more importantly for the people in the vast number of communities that are dependant on these suppliers for their jobs.

It would create a severe downward spiral of the economy by increasing the already high jobless figures and reducing the consumer confidence in the automotive sector.

The knock-on affect on other industries would be felt around the world and it would take years to stabilize the global economy.

Just like the banks and the other financial institutions before them the automotive companies are now starting to realize that the only way they can credibly continue is to restructure and downsize their organizations.

This will mean reducing the unprofitable segments of their portfolios by selling them off, as is now apparent with the negotiations between GM and Fiat for GM Europe, (Opel).

And it will not stop there, we will see many such acquisitions being put in place all over the world to try and stabilize what is now an industry that has fallen from its normal high regard with the public.