Detroit demise would hit, not help, Asian rivals

By Chang-Ran Kim, Asia autos correspondent - Analysis

TOKYO (Reuters) - Asia's top automakers would not welcome the collapse of one or even all of their three big Detroit rivals, though the likes of Toyota Motor Corp, Honda Motor Co Ltd and Hyundai Motor Co would expect to gain sales in the long term.

Industry executives and analysts say the immediate carnage from a bankruptcy of General Motors Corp, Ford Motor Co or Chrysler LLC would spread throughout an industry that is bleeding cash in a global slowdown.

"If all the Big Three were to fail, the consequences of that are beyond imagination. I think it would upset the very foundation of the U.S. economy," Suzuki Motor Corp CEO Osamu Suzuki warned last week.

GM, Ford and Chrysler have urged Congress this week to authorize $34 billion in loans and credit lines, saying they will restructure, and cut models, jobs and executive pay to remain viable.

Suzuki's peers agree, maybe reluctantly, that a multi-billion dollar U.S. bailout is inevitable.

"From a business standpoint it would be unfair," Honda Executive Vice President Koichi Kondo told Reuters. "But if the Big Three filed for Chapter 11, that would hurt us badly."

A bankruptcy filing would disrupt every aspect of the automaking industry.

Dealers selling cars for multiple brands would go under; if all the Big Three lost their U.S. operations, nearly 3 million jobs would be lost in the first year, U.S.-based Center of Automotive Research estimates, devastating already frail consumer sentiment.

GM's failure alone would mean the more than $200 billion in interest-bearing debt at the carmaker and its GMAC financing arm could be worthless for countless retirees and taxpayers, further upsetting consumption patterns.

Perhaps the most damaging scenario would be the domino effect on a complex web of a multi-tiered supply chain.

"The exact consequences are difficult to model, but simplistically, we'd assume the financial impact on suppliers would force many into Chapter 11, and for a period of time they would be unable to produce components for non-Detroit companies," Bernstein Research's Max Warburton wrote in a report.

Deutsche Securities analyst Kurt Sanger said that would leave few main options, none of them desirable, for Toyota, Honda and Nissan Motor Co: speed up payments to suppliers to help with liquidity; switch to backup suppliers, at a cost; or buy suppliers' tooling to continue production.

"The reality is that such a scenario would likely result in a combination of these options," Sanger said.

Japanese brands account for 40 percent of new vehicles sold in the United States, the world's biggest car market, while the Big Three sell just under half. Japanese automakers produce more than 60 percent of their cars for the U.S. market in North America.

"If you're missing even one component, you can't build a car," said Honda's Kondo, noting that parts makers provide 80 percent of a car's components.