Car-parts suppliers in trouble

Lear and Dura Automotive are among more than a dozen car-parts suppliers that analysts say may file for bankruptcy over the next two years as US car-makers cut back on production.

At least seven parts makers have sought court protection over the past 24 months, and many of those that have not are one financial adversity away, said Chris Benko, managing director of PricewaterhouseCoopers automotive group in Detroit. Hayes Lemmerz International and Visteon might also file, said Sean Egan, managing director of Egan-Jones Ratings.

Car-parts suppliers are under pressure as their biggest customers, Ford Motor and General Motors, build fewer cars in North American because of declining US sales. Higher raw-materials prices and the inability to raise prices because of competition may be impossible to overcome, analysts say.

"We believe another 15 suppliers could file for bankruptcy within the next 24 months," said Egan, who is based in Haverford, Pennsylvania.

"A lot of companies that have not filed for bankruptcy may be close to breaking point," said Lehman Brothers analyst Darren Kimball. "The risks are very high right now," he said, citing commodity prices and an inability to get car-makers to pay more for parts.

Delphi, the world's largest car-parts maker, Tower Automotive and Collins & Aikman filed for Chapter 11 bankruptcy last year.

Dana filed on March 3 after posting a preliminary loss of US$1.6 billion ($2.57 billion) in 2005.

- BLOOMBERG