WASHINGTON (Dec. 5, 2008) — A bankruptcy of even one of the Detroit 3 would cause an already distressed supply base "to implode," Johnson Controls Inc. President Keith Wandell told Congress.
Testifying Dec. 4 at a Senate Banking Committee hearing on a $34 billion auto maker bailout request, Wandell said a Detroit 3 failure would cause a cascade of failures among suppliers, particularly smaller female- and minority-owned companies.
Johnson Controls makes seating, batteries and interior parts.
Wandell said Toyota, Nissan, Honda, Mercedes and all car makers manufacturing in the United States "are deeply concerned about the viability of the U.S. supply base."
A bankruptcy of one car maker, he said, would likely cause parts interruptions at all the others.
Wandell said the interdependency of the supply base was driven home during the bankruptcy and eventual liquidation this year of Plastech Engineered Products Inc., formerly the largest minority-owned auto supplier in the world.
He said if Johnson Controls and others hadn't stepped in and bought Plastech's assets, as many as 52 vehicle assembly plants would have risked parts interruptions.
And Plastech, with sales of about $1.4 billion in 2007, was small compared with the supplier chaos that would occur with a Detroit 3 bankruptcy, Wandell predicted.
In a bankruptcy, months of receivables for parts already delivered would be tied up in court and be uncollectible, he said.
Johnson Controls, based in Milwaukee, makes seating, batteries and interior parts and ranks No. 7 on the Automotive News list of the top 100 global suppliers with global sales to auto makers of $18.50 billion in fiscal 2007.