Saturday, March 04, 2006

More woes for the US auto Industry

MSNBC just reported that Dana Corporation (US auto-part maker) filed for bankruptsy.

Hit by higher costs and a slowdown in trucks sales at its two biggest customers, Ford and General Motors, Dana has been unable to stop bleeding red ink. Now, the financial meltdown of one of the world’s biggest suppliers will likely drive parts prices higher, putting further pressure on Ford and GM.

Like much of the U.S. auto parts industry, Dana has been caught in a downward spiral that shows no signs of easing. Higher energy and raw materials costs have taken a bigger bite out of its revenues. A steep drop in vehicle sales – especially SUVs and light trucks – means fewer parts orders for the company, which makes brakes, axles and other vehicle parts.

And auto makers, looking to ease their own financial pain, continue to pound their suppliers for lower prices. Parts customers like GM and Ford are increasingly demanding the so-called “China price,” according to Efraim Levy, an auto industry analyst at Standard & Poor’s.

“Parts companies used to be able to get a premium because they did the best job and their technology was better,” he said Levy. “Now (their customers) just say, ‘We can get this done in China at a substantially lower price. So either match it or we’ll take the business away, and forget the quality issue."

My point for posting up this issue: Just another example illustrating that all is not well in our economy. IMHO, GM will file for bankruptsy by 2008 and the economic shockwaves will be massive.


Out at the peak said...

Walmart mentality is killing America.

contrarian2day said...

Unless the USD loses a significant percentage of its value, this trend (outsourcing & US companies struggling to compete with Asia) will only continue.