The purchasing executive at one of Europes major automakers wanted to make sure that I -- and everyone else -- understood the severity of todays meltdown in the auto industry.
The real crisis is coming, he said. May. June. Whenever it comes, it will be much worse than we thought.
Allow me to elaborate: We havent seen anything yet.
Behind the scenes inside Europes automakers, there is a scramble underway to save the supplier companies you probably havent heard much about.
They are not the major players in the supply chain. They are the small ones.
They are not the companies that are well positioned because of cash reserves. They are the ones that didnt have cash to begin with.
Small suppliers are going bankrupt in Europe. And production cuts this quarter are going to drive them over the edge.
CLEPA, Europes supplier organization, estimates 500 partsmakers will go out of business by April -- 10 times more than in a normal year.
With 75 percent of the parts in an average European car coming from components manufacturers, automakers are scrambling for solutions.
Birgit Behrendt, purchasing boss at Ford of Europe, is trying to lend a hand with a program geared to quickly help suppliers navigate the bureaucratic waters of government money and emergency funds.
In some cases, they just dont know how to get access to money, she said. We are trying to help.
Other car companies are doing the same. In these times, forming a bridge between suppliers and automakers is the only solution.
Without this help, smaller suppliers will be insolvent, which will start a chain reaction at other suppliers and automakers.
It is already happening.
Jean-Christophe Quemard, purchasing director at PSA/Peugeot-Citroen, keeps a list of 45 struggling partsmakers on his desk -- twice as many as last year. Behrendt and
others have similar lists.
A 50 percent drop in first-quarter car production wont be felt until the summer, when bills cant be paid. Banks are raising rates on loans. Some suppliers are getting no money at all.
Bad news for one is bad news for many.
And without collaboration the bad news will only get worse.