Reuters reports that GM is intensifying its price squeeze on suppliers, raising industry fears of more auto parts supplier bankruptcies in the U.S. and Europe.

GM currently spends about $85 billion annually on externally-sourced parts and materials, and needs to cut back its costs to survive. In 2005, GM dropped 500 suppliers from its list, cutting the total supplier base to 3,200 companies. Also in 2005, parts suppliers Delphi, Tower Automotive and Collins & Aikman declared bankruptcy.

GM is favoring East Asian suppliers, with lower labor costs, as one solution to their cost problem. This may force U.S. and European auto supply companies to shift work overseas to compete. A Deutsche Bank executive predicted more supplier bankruptcies in 2006, and further consolidation.

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