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Parts suppliers sweat as GM restructuring deadline nears

The side mirrors assembled for new Malibus are stylish but of little use for looking into the future of local parts suppliers for General Motors' Fairfax plant.

Parts providers such as The Woodbridge Group, which puts together those mirrors, steering wheels and consoles in the Northland and sells them to the Kansas City, Kan., operation, are watching uneasily for clues of how the restructuring of America's largest carmaker shakes out.

Six of GM's 1,500 suppliers — largely unnoticed locally and only marginally included in national debate — operate in the Kansas City area.

Those businesses employ 900 workers, most of whom don’t enjoy the same pay or benefits as those at the big car assembly plants, but hold their breaths just the same as talk of shutdowns swirls ahead of GM’s June 1 restructuring deadline.

GM projects its supplier network shrinking by 30 percent, partnering with the most cost-efficient suppliers.

The company's downward spiral has led dozens of parts companies into bankruptcy in the last year. In the coming weeks, many survivors on the financial brink must choose how best to ride out what is coming: Take Washington's hand or swim for themselves.

When GM's extended summer shutdown didn't strike Fairfax last month, many at the satellite operations naturally were relieved.

"Fairfax has always been a real good plant for us," said Jerry Norsworthy, general manager of two area Woodbridge facilities. "The Malibu is a great car. This downturn in the economy was unfortunate, because the Malibu was becoming a top GM seller before all this happened. The fact that they’re launching the new Buick here gives you an indication of what GM thinks of this plant."

Rick Klingenberg, vice president of United Auto Workers Local 710, is "more confident now that Fairfax is continuing to operate, while other GM plants have to close."

But a possible GM bankruptcy puts scary industry-meltdown scenarios into play for everyone in the company food chain, he said, despite President Barack Obama’s promises of an orderly process.

"If there is a GM bankruptcy, you just never know which plants will survive and which won't," he said. "If a major supplier goes down because GM files bankruptcy, that could set off a domino effect. At that point, any plant could be in jeopardy of shutting down because of a parts shortage."

GM and the administration contend that the flow of parts to GM plants and the flow of money to its critical suppliers will not be disrupted once the restructuring happens. To that end, the Treasury Department has made $2 billion available to GM suppliers (along with $1.5 billion to Chrysler's).

Under the program, suppliers can pay a small fee to get paid for delivered parts quicker than the usual 45-day wait. Or they can use the program's guarantee to banks that they will be paid to help the suppliers obtain tide-over loans.

But a looming bankruptcy puts suppliers between a rock and a hard place. If they go to Treasury, said Laura Marcero, partner with Grant Thornton’s corporate restructuring services group, they must keep their current contract with GM. But that may no longer be profitable because of production cuts.

"Suppliers are facing a dilemma," Marcero said.

Read more at KansasCity.com

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