Auto sector said facing a restructuring ‘tsunami’

Oct 29, 2008 | 07:51 AM | Michael Cowden

A restructuring "tsunami" is poised to sweep across the auto industry as global production volumes dwindle in the wake of tumbling demand.

The potential result a wave of supplier bankruptcies and consolidation, according to a panel of bankruptcy and restructuring experts at AMM's 3rd Annual Auto Metals Conference in Detroit.

"We are sitting in a tsunami of what is going to be probably an unprecedented period of automotive restructuring," said John C. DiDonato, managing director of Huron Consulting Group Inc., Chicago.

The main culprit declining auto production volumes. In the last six months of 2008, the U.S. auto industry likely will run at an annual rate of less than 12 million vehicles, and he expects the number to fall below 12 million in 2009.

"During 2008, none of the volume rating services has been ahead of the declines," DiDonato said. "It's very difficult to catch a falling knife."

The U.S. situation is hardly unique. Production also is off sharply in Europe and sales around the world are down, hurting vehicle manufacturers in the United States, Europe and Asia alike.

"One of the reasons the North American market has been able to survive is that there has been a natural hedge for global suppliers between Europe and North America," he said. The problem is, that hedge no longer exists, he added.....