January 12, 2009
African American Auto Suppliers Face Rough Road Ahead
Detroit automakers rolled out a fleet of fuel-efficient and electric vehicles at the 2009 North American International Auto Show today, sending a clear message to Washington and beyond that the industry doesn’t plan to fade away.
The vehicle reveals, which kicked off Sunday in Detroit during the first of several press days, are crucial to the U.S. automakers’ comeback story, but the march toward a possible resurgence will result in more headcount reductions and business dealings with fewer auto suppliers.
At the auto show, cost-cutting steps were visible as the fanfare typically associated with Detroit’s shows was quieted. The focus was on future vehicles such as the redesigned Ford Taurus large sedan and General Motor’s Chevrolet Spark mini-car.
Japanese auto maker Nissan Motor Co. chose to opt out of Detroit’s show all together to save cash after unveiling its upcoming vehicles at the Los Angeles auto show last November. The move underscored the economic challenges the auto industry as a whole faces.
“Will African American suppliers be impacted? Unfortunately, yes,â€ said Rod Gillium, General Motors Corp.’s vice president of corporate responsibility and diversity, said in an interview on the sidelines of the Detroit auto show.
In the auto industry, suppliers typically build vehicle parts in sequence with vehicle assembly at auto plants. As GM, Ford Motor Co. and Chrysler L.L.C. redouble efforts to stay alive, they plan to do so with fewer auto suppliers. The fewer suppliers they do business with, the greater cost saved.
The year will be difficult as GM, which along with Chrysler received a $17.4 billion federal loan in December, takes critical measures to turn the business around. GM plans to submit an enhanced plan to Congress Feb. 17 that will highlight in greater detail information about its capital structure and fuel economy plans among other items.
“As we reduce capacity from our plants, we won’t need so many parts,â€ Gillium said. He also said GM is committed to doing business with minority suppliers but it will be on a different scale.
Companies building parts to install directly into vehicles such as knobs or seating components will be most affected, he added. Those providing services to the auto industry such as janitorial or accounting on other hand could experience growth.
Black-owned suppliers are in vulnerable positions because most of those businesses are relatively young and lack adequate reserves to buttress tough times in the auto sector on the backdrop of a dismal U.S.economy, said Leon Richardson, head of the National Association of Black Automotive Suppliers, based in Detroit.
“We just have not had the opportunity to build the reserves to weather this type of business storm,â€ Richardson said. Black suppliers have existed for roughly 30 years versus GM and Ford Motor Co.’s more than 100 year lifespans, he said.
Vehicle production is expected to be low, in line with another round of anticipated slowed sales.