However prospects for the industry are grim if a bailout fails to arrive
Investors in major auto parts suppliers stand to benefit if a U.S. bailout staves off bankruptcy for U.S. automakers and prevents a cascade of failures in the supply base, according to analysts. "The suppliers would benefit tremendously from new capital coming into the industry and from providing assurances of the supply of trade credit," Fitch Ratings managing director Mark Oline told Reuters last week.
"If the government provides assurance that GM, Ford and Chrysler can meet their bills, that provide confidence and willingness to extend trade credit throughout that chain," Oline said.
Suppliers such as Lear Corp and ArvinMeritor Inc, whose balance sheets have been already strained by tighter credit and plunging auto production, have taken a further hit in recent weeks by concerns they may not get paid if their major customers are pressed to the brink of failure.
Analysts say any form of government aid for automakers – a bailout or even a government-guaranteed bankruptcy – could spark a rally in beaten-down auto supplier stocks on hopes that suppliers will recover their accounts receivables and be able to finance future shipments.
KeyBanc Capital Markets analyst Brett Hoselton said shares potentially set for a bounce in the event of a GM bailout include those of Lear, ArvinMeritor, American Axle & Manufacturing Holdings Inc, TRW Automotive Holdings Corp and Visteon Corp.
"The fact that Congress agreed to reconvene out of session during the early part of December clearly demonstrates a significantly higher level of commitment toward "bailing out" the automakers ... which may result in an auto supplier stock rally," Hoselton said in a research note on Monday.
While dismissing the possibility of a "blank check" being sent to Detroit, U.S. lawmakers agreed last week to give the automakers another chance to make their case for a rescue, asking them to submit restructuring plans by Dec. 2. Congress is scheduled to reconvene out of session in the week of Dec. 8 to review the plans and consider aid.
"Even if one automaker has to file [for bankruptcy], I think the domino effect will be disastrous to the supply community and it could very well take one of the other automakers out," said Jim Mallak, former chief financial officer of parts maker Tower Automotive, which was taken private by Cerberus Capital Management last year.
"That comes about because there are so many common suppliers throughout the entire industry," Mallak, managing director at restructuring advisory Alvarez and Marsal.
The financial strain on parts suppliers also has the potential to create additional pressure on automakers as suppliers tighten payment policies to ensure they get paid. Although suppliers and their investors could be the biggest beneficiaries of a bailout, the outlook is dim for the sector if Congress fails to extend aid and one or more major automakers file for bankruptcy, analysts said.
If a bailout fails to materialise, auto suppliers will be forced to cut 275,000 jobs immediately, according to a survey of 275 supplier executives released on Tuesday by Planning Perspectives.
Analysts had estimated that about a third of U.S. parts suppliers were at risk of failure even before the latest credit crisis and the downturn in sales to 25-year lows last month.
"If you are very close to a bankruptcy state now, the filing of one of their major customers will only make things worse for them," Mallak said. "I don't think you can afford to start toppling the (supply) industry."
Copyright © 2025 S&P Global Inc. All rights reserved.
These materials, including any software, data, processing technology, index data, ratings, credit-related analysis, research, model, software or other application or output described herein, or any part thereof (collectively the “Property”) constitute the proprietary and confidential information of S&P Global Inc its affiliates (each and together “S&P Global”) and/or its third party provider licensors. S&P Global on behalf of itself and its third-party licensors reserves all rights in and to the Property. These materials have been prepared solely for information purposes based upon information generally available to the public and from sources believed to be reliable.
Any copying, reproduction, reverse-engineering, modification, distribution, transmission or disclosure of the Property, in any form or by any means, is strictly prohibited without the prior written consent of S&P Global. The Property shall not be used for any unauthorized or unlawful purposes. S&P Global’s opinions, statements, estimates, projections, quotes and credit-related and other analyses are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security, and there is no obligation on S&P Global to update the foregoing or any other element of the Property. S&P Global may provide index data. Direct investment in an index is not possible. Exposure to an asset class represented by an index is available through investable instruments based on that index. The Property and its composition and content are subject to change without notice.
THE PROPERTY IS PROVIDED ON AN “AS IS” BASIS. NEITHER S&P GLOBAL NOR ANY THIRD PARTY PROVIDERS (TOGETHER, “S&P GLOBAL PARTIES”) MAKE ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE PROPERTY’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE PROPERTY WILL OPERATE IN ANY SOFTWARE OR HARDWARE CONFIGURATION, NOR ANY WARRANTIES, EXPRESS OR IMPLIED, AS TO ITS ACCURACY, AVAILABILITY, COMPLETENESS OR TIMELINESS, OR TO THE RESULTS TO BE OBTAINED FROM THE USE OF THE PROPERTY. S&P GLOBAL PARTIES SHALL NOT IN ANY WAY BE LIABLE TO ANY RECIPIENT FOR ANY INACCURACIES, ERRORS OR OMISSIONS REGARDLESS OF THE CAUSE. Without limiting the foregoing, S&P Global Parties shall have no liability whatsoever to any recipient, whether in contract, in tort (including negligence), under warranty, under statute or otherwise, in respect of any loss or damage suffered by any recipient as a result of or in connection with the Property, or any course of action determined, by it or any third party, whether or not based on or relating to the Property. In no event shall S&P Global be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees or losses (including without limitation lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Property even if advised of the possibility of such damages. The Property should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions.
The S&P Global logo is a registered trademark of S&P Global, and the trademarks of S&P Global used within this document or materials are protected by international laws. Any other names may be trademarks of their respective owners.
The inclusion of a link to an external website by S&P Global should not be understood to be an endorsement of that website or the website's owners (or their products/services). S&P Global is not responsible for either the content or output of external websites. S&P Global keeps certain activities of its divisions separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain divisions of S&P Global may have information that is not available to other S&P Global divisions. S&P Global has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process. S&P Global may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P Global reserves the right to disseminate its opinions and analyses. S&P Global Ratings’ public ratings and analyses are made available on its sites, www.spglobal.com/ratings (free of charge) and www.capitaliq.com (subscription), and may be distributed through other means, including via S&P Global publications and third party redistributors.
