DETROIT - A wave of mergers is expected among small, privately owned US supplier companies. Craig Fitzgerald, head of automotive services at consultancy Plante & Moran LLP, predicts firms with annual sales in the range $5 million to $250 million will lead the trend.
He surveyed 140 suppliers with sales of up to $1 billion and says some risk bankruptcy in the next economic downturn.
'They have not redirected their marketing and sales efforts to grow their sales with future Tier 1 suppliers,' he said. Many had not chased sales outside of North America aggressively enough.
A quarter of the companies surveyed had operating profits of 4-7 percent of sales.
The same proportion had debt-to-equity ratios greater than 3-to-1, which in a recession 'could become uncomfortable for banks.'