Ford May Suffer as Chrysler Shutdowns Reach Suppliers

(Bloomberg) -- Ford Motor Co., the only self- sufficient U.S. automaker, may be hobbled should prolonged shutdowns at Chrysler LLC and General Motors Corp. lead to failures of essential partsmakers.

Ford, launching three critical models, is at risk of periodic shutdowns if suppliers it shares with GM and Chrysler collapse, analysts said. GM is closing 14 North American plants for as much as nine weeks this summer and Chrysler, which filed for court protection from creditors on April 30, plans to close its factories until emerging from Chapter 11 in a month or two.

“There’s definitely potential for sporadic shutdowns at Ford,” said Mike Wall, supplier analyst at industry consultant CSM Worldwide in Northville, Michigan. The idling of plants at Chrysler and GM “is going to shoot a significant amount of stress through the supply chain.”

Ford is vulnerable because of the interwoven nature of the auto-supply network. Ford shares 70 percent of its suppliers with GM and 64 percent with Chrysler, according to CSM. Asian- based automakers share 59 percent with Chrysler and 58 percent with GM. The loss of a single part can close a plant, Wall said.

“Our ability to unilaterally carry the supply base through this, we just can’t do it,” Ford Executive Chairman Bill Ford told reporters today at a Wayne, Michigan Ford factory. “We’ve spent a lot of time talking to the Automotive Task Force about keeping the viability of the supply base. This is a major issue.”

‘Fluid Situation’

Toyota Motor Corp. and Honda Motor Co. may also be disrupted if suppliers who lose business during the GM and Chrysler shutdowns can no longer afford to stay in business, said Craig Fitzgerald, a supplier consultant at Plante & Moran in Southfield, Michigan.

Chrysler purchasing chief Scott Garberding said in court documents that the failure of suppliers to the Auburn Hills, Michigan-based automaker would “cause severe production problems” for other carmakers, “including GM and Ford.”

Ford doesn’t anticipate production disruptions in the next 30 days, said Todd Nissen, a spokesman for the Dearborn, Michigan-based automaker.

“We don’t see any short-term issues with continuing production,” said Nissen. “Beyond that, we’re all looking at the same things. It’s a fluid situation.”

GM, the largest U.S. automaker, has until June 1 to meet a government-imposed deadline to negotiate concessions with labor and lenders or file for bankruptcy. GM is operating on $15.4 billion in government loans and requested $11.6 billion more.

‘Really Worried’

“Take a supplier with 50 percent GM and 50 percent Ford, if GM files, suddenly their book of business is cut in half,” said Keith Francis, managing director at restructuring firm Hydra Professional in Farmington Hills, Michigan. “Ford, which has positioned itself to stay out of the bailout, has increased risk with its supply base because of what’s happening.”

Ford, Toyota and other automakers are probably “really worried” about the fallout from the production shutdowns and managing their supply bases, John Plant, the chief executive officer of TRW Automotive Holdings Corp. said on a conference call today.

The Livonia, Michigan-based company, the world’s largest supplier of vehicle-safety equipment, managing distress among its own suppliers because of the drop in vehicle production, Plant said.

Ford rose 41 cents, or 7 percent, to $6.26 at 4:00 p.m. in New York Stock Exchange composite trading. Ford has more than doubled this year. GM fell 19 cents, or 10 percent, to $1.66. GM has declined 48 percent this year.

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