Report: Many suppliers downsized for crisis and now too small to handle big jobs

Many auto industry analysts are predicting that sales in 2011 will increase to an annualized rate of about 12.7 to 13 million vehicles, up a million or more units from 2010 levels. That's great news for auto manufacturers, but while customers may be more interested in re-entering the car market next year, Automotive News reports that the still-struggling supply base may not be able to satiate the new-found demand.

The bankruptcies of General Motors and Chrysler made headlines in the past year, but the biggest cuts were made to tier two and three suppliers. Thousands of parts houses didn't survive (along with tens of thousands of employees), and the companies left standing are leaner than ever. AN reports that many suppliers are reluctant to move beyond overtime and hire on new employees until the economy shows more signs of recovery. Still more suppliers would like to move forward with plans to expand but the credit markets are still weak, and it's difficult to build or restructure factory space without any money. Then there's the shortage of rare earth metals, and the fact that many highly skilled workers have moved on to other, hopefully less volatile lines of work.

Will the long-struggling industry recover? We're guessing that suppliers will find a way to remedy any long-term part shortages, but it appears that the job won't be quite as easy as pounding a "Now Hiring" sign on the front lawn.

[Source: Automotive News - Sub. Req. | Image: Chris Hondros/Getty]

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