A Blow To Ford In The Battle Between Auto and Parts Manufacturers

Oct.18.06 | About: Ford Motor (F)

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Ford Gets Cut Off by a Top Supplier As Detroit Squeezes Parts Makers [Wall Street Journal]

Summary: In the battle between U.S. auto manufacturers and their suppliers, parts maker Colin & Aikman fired a shot at Ford last week. The two were reputedly engaged in a pricing dispute of several million dollars over interior parts when Collins & Aikman cut off deliveries to Ford, resulting in the latter stopping production in one of its Mexican assembly plants. In this specific drama, Collins & Aikman asked Ford for price increases due in part to rising plastic costs, threatening last week to stop shipments; after shutting down the Mexican plant, Ford ultimately gave in to Collins & Aikman's demands. Beyond this case, however, there has been a long history of tension between manufacturers suffering from substantial loss of market share and their suppliers, some of the largest of which--Collins & Aikman included--are in Chapter 11. As part of their bankruptcy proceedings, parts makers have been pushing back against the auto manufacturers' pricing pressure, renegotiating contracts and attempting to improve their pricing power. According to Ford's head of North American operations, the company has had to postpone expected commodity-cost savings by a couple of years as so many of its suppliers are in Chapter 11 proceedings.
Related links: Tough Times for Auto Parts Makers Should ContinueWhy Japanese Cars Earn $2400 More EachDetroit is Out of LuckThrowing In The Towel On Ford
Potentially impacted stocks and ETFs: Ford (NYSE:F), General Motors (NYSE:GM), DaimlerChrysler (DCX). Auto parts manufacturers: Johnson Controls (NYSE:JCI), Magna International (NYSE:MGA), TRW Automotive Holdings (NYSE:TRW).

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