SCDigest editorial staff

The News: Auto parts supplier Collins & Aikman, itself operating under bankruptcy protection, briefly stopped delivering a few key parts to Ford, causing a short shutdown in the OEM’s Mexican plant, and lost production of about 400 vehicles.

The Impact: Auto parts makers have been struggling as badly if not worse than U.S. OEMs, with most of the largest providers themselves in bankruptcy or facing serious financial difficulties At the same time, the Ford and GM are promising even further reductions in parts procurement costs. Something has to give.

The Story: Collins & Aikman stopped delivering a few keys parts last weekend to Ford in a continuing pricing dispute. As a result, a Ford factory in Hermosillo, Mexico, that makes one of its hotter models – the Ford Fusion – as well as other vehicles had to shut down for some hours (Friday night to Saturday morning) due to a shortage of instruments panels and some other parts for car interiors provided by Collins & Aikman. Automotive plants run on very lean inventories and can quickly face production issues from even short breaks in the flow of supply. Estimates are that the shutdown decreased production by about 400 vehicles.

A Collins & Aikman spokesman said the pricing dispute involved several million dollars. There have been on-going tensions in the industry for years relative to the OEM’s relentless demands for price reductions, exacerbated in the past few years by rapidly rising steel, energy, oil and other raw material costs. Parts suppliers say they are trapped in long-term contracts that do not enable them to make a profit in such an environment.

Despite this scenario, and parts providers like Collins & Aikman, Delphi and others in bankruptcy, more pressure is coming. GM is targeting $1 billion in procurement reductions. Chrysler hopes to reduce vehicle costs by $1000 in part by better parts pricing. Ford has a goal of $6 billion in procurement savings by 2010 or soon after.

Parts suppliers, especially those with bankruptcy protection and/or new private investment ownership, appear to be ready to play more hardball in the face of these demands and their own financial troubles. It will be an interesting game.

Though Collins & Aikman soon re-initiated deliveries, a Ford spokesman said “The relationship has been irreparably harmed.”

Meanwhile, Toyota continues its harmonious supplier relationships and relentless global and North American marker share gains.

Is there any hope for the U.S. auto industry and its terrible supplier relationships? Do you think Collins & Aikman is nuts or smart to play hard ball back? Let us know your thoughts.

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