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GM's Bankruptcy Filing Preceded by a Period of Long Decline

May 31, 2009

The speculation is now over: GM has officially followed Chrysler into bankruptcy.
There are few differences in the story this time around: Jobs will be lost, cuts will be made, uncertainty in the market will continue. A key difference, however, is the focus of the news. More agencies are paying attention to the impact the move will have on suppliers to the industry. GM accelerated payments to some suppliers, with the hope of softening the blow, and the White House released a statement promising continued support from the Treasury Department's Supplier Support Program during the process.
Even with these measures, the impact will ripple through the supply chain and have potentially devastating effects. All we can do as a Tier 2 supplier is manage the best we can on an order-to-order basis, says Mike Hamzey Jr., vice president of R.M. Wright Co., Farmington Hills, MI.
The company began holding orders bound for Tier 1 suppliers to GM and Chrysler earlier this year and releasing them one-by-one only after payment was assured. "We never would have considered that before because you run the risk of losing that business," he says. The goal is to minimize the damage as more plants and projects stall during the process.
The impact may not be as bad as it could have been a few decades ago. According to a recent article in Bloomberg, the bankruptcy of GM is really just the end of the long decline experienced by the auto giant since its peak in 1979 when it employed 618,365. It is already a "shadow of what it was," employing only 88,000 at the end of the first quarter.
And with the support of the federal government, the initial bankruptcy proceedings are expected to be complete in 60 to 90 days - a far cry from the years it has taken some major companies to emerge from bankruptcy protection.
For a good overview of the filing's impact, check out "GM's Long Decline May Make Bankruptcy ‘Irrelevant' to Economy" from Bloomberg.
Related from MDM: 
Chrysler Bankruptcy: What It Means to Distributors
Suppliers to Automakers May Need Help, Too
Distributors Weather Auto Turmoil"

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