October 23, 2009
by Adam Reiser
Wall Street Journal
“We’re just fighting to stay alive,” said Tim Knisley, PMT’s chief financial officer.
The high-profile bankruptcies of Chrysler, General Motors Corp. and a few big suppliers have overshadowed the financial peril now facing the hundreds of small subsuppliers whose fate is also tied into the auto industry.
Yet the woes at PMT are being replicated across the country. And the situation could get worse in the weeks ahead if a two-month shutdown of most GM plants goes forward as planned.
Since these smaller players don’t get financial help from the federal government, many could follow GM and Chrysler into bankruptcy court.
Kimberly Rodriguez, who heads the automotive practice at consulting firm Grant Thornton LLP, said these smaller, Tier 2 and Tier 3 suppliers are in distress. “There’s no support going their way.”
Most small suppliers have already made deep cuts in order to stay in business. But at least a dozen small suppliers have liquidated so far this year, according to Craig Fitzgerald, a partner at consulting firm Plante & Moran PLLC.
The Treasury Department’s Auto Supplier Support Program allocated $5 billion to insure the receivables of direct suppliers doing business with GM and Chrysler. But that aid has yet to have a big effect on those suppliers’ vendors, like PMT.
Mr. Knisley estimated that PMT won’t make it past the end of this month if business doesn’t pick up soon.
PMT a year ago employed 200 people, was running at nearly 90% capacity and planning on a “big growth year,” Mr. Knisley said. It spent millions of dollars on a new press and on refurbishing one of its two old ones. Now PMT is running at just 30%-40% of capacity and one press is idle. Payroll has tumbled to around 120 people.
The company last year had $40 million in revenue and projected $59 million in revenue for this year. But Mr. Knisley since has cut his 2009 sales forecast to no more than $25 million.
The most immediate problem for most small suppliers is cash.
“Everybody in our situation right now is managing for cash flow, not for profit,” said Ralph Hardt, president of the North American unit of Switzerland’s Feintool International Holding. Feintool’s U.S. employment has dropped to 260 people from a peak of around 400 in late 2007. Its Cincinnati-based operations stamp metal parts for doors, seats, engines and transmissions that go into vehicles made by GM, Honda Motor Co. and Ford Motor Co.
At Termax Corp., President Bill Smith said he is confident his company’s balance sheet is strong enough to survive until production climbs, but he is worried about some of his suppliers. One of the Lake Zurich, Ill., company’s suppliers coats fasteners that Termax makes for Ford vehicle interiors. Mr. Smith said he isn’t sure the plater, which he declined to name, will survive. If it doesn’t, he will have to go to Canada or Europe to get the plating done at higher cost.
PMT, meanwhile, is getting assistance from customers. One is the U.S. unit of Germany’s Mahle Group.
PMT ships pistons 38 miles southwest from its Surgoinsville facility to a Mahle plant in Morristown, Tenn. “They determined us to be the key strategic supplier” and shifted business to PMT, said Mr. Knisley, the finance chief.
And Mr. Knisley said Metaldyne is treating PMT as an essential supplier, giving it some priority as a bankruptcy creditor. He said Metaldyne told him that PMT could expect payment of the $844,180 Metaldyne owes in 20 days.
He hopes the company can last that long. “We’re holding on with bare knuckles.”
Write to Andrew Grossman at // < ![CDATA[
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Printed in The Wall Street Journal, page B2
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