Suppliers Struggle as Auto Production Restarts
Photo: leo2014 via Pixabay
After the coronavirus pandemic forced many production facilities to a halt, automakers have begun to gradually restart production, with new measures in place to help protect workers. Although automakers have the means to follow strict state guidelines, many suppliers struggle to do the same.
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How the pandemic has affected suppliers
Production plants across the United States were put on hold between four and seven weeks, causing the release of many new models to be delayed. However, after implementing new safety measures in factories, automakers have been quick to restart auto production and begin work on redesigned models.
While the majority of automakers have access to resources and plenty of money to ensure their factories abide by state guidelines, a lot of suppliers are facing cash shortages and lack the means to protect their workers. This is largely due to the fact that suppliers didn’t have revenue sources while production was paused, unlike many automakers.
In April, ratings agency Standard & Poor noted that the probability of default for automotive suppliers increased to 20 percent. This was well above the 5 percent probability from the beginning of 2020. Small Tier 2 and Tier 3 suppliers, which give parts to Tier 1 suppliers, were at the greatest risk overall. If suppliers continue to struggle during the pandemic, automakers will be faced with parts shortages and limited production capabilities of facilities.
Recently, Julie Fream, CEO and president of the Original Equipment Supplier Association, said that suppliers were in need of a whopping $20 to $25 billion to resolve a number of issues. Lawmakers are currently working to provide automotive suppliers with additional money.
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Hopefully, suppliers will be able to overcome these hurdles and successfully open their facilities. Only then can production processes run smoothly again and enable automakers to launch new vehicles later this year.
Amanda Drago lives in West Chester, Ohio with her wonderful family, which includes her adorable dog, Coco. Amanda recently graduated from Miami University with degrees in both marketing and creative writing. However, if she was ever forced to change career paths, she imagines that she would train dogs for movies. In her spare time, she enjoys reading, writing, and watching Netflix. She also has a special place in her heart for theatre and purchases tickets to as many shows as she can. See more articles by Amanda.