Long GM strike could hurt parts suppliers

By Ben Klayman

CHICAGO (Reuters) - A strike at U.S. automaker General Motors Corp will hurt suppliers if it drags on, further battering an industry already suffering from shrinking sales and possible bankruptcies, analysts said.

"It's definitely going to hurt people and the longer it lasts, the worse it's going to hurt," said Shelly Lombard, senior high-yield analyst with Gimme Credit, an independent research firm on corporate bonds.

U.S. auto parts makers have been pressured in recent years by the declining market share in North America of major U.S.- based customers. Several suppliers, including Delphi Corp, have filed for bankruptcy protection in the past three years and a long strike at GM would also hurt.

One of the more vulnerable suppliers is American Axle & Manufacturing Holdings Inc, which while not financially weak, derives more than 70 percent of its sales from GM, Lombard said.

Some suppliers may not count GM as a large customer, but are in weaker financial shape and cannot afford to lose any business, Lombard added, pointing to Visteon Corp.

Others with GM business include Delphi Corp, Goodyear Tire & Rubber Co, Johnson Controls Inc, Lear Corp and Tenneco Inc.

The first to feel the pain, however, could be smaller, privately held suppliers, who cannot turn to Wall Street for financial aid, Lombard said.

"For every car not built, that's 10,000 parts not used and, eventually, that will impact people," said Neil De Koker, president of industry trade group Original Equipment Suppliers Association.

The United Auto Workers (UAW), which represents more than 73,000 GM factory workers, called the national strike after the union failed to reach a deal that would allow the Detroit automaker to cut its $5 billion annual health-care bill.

GM -- with plants spread throughout the United States, Canada and Mexico -- along with U.S. rivals Ford Motor Co and Chrysler Corp, is seeking concessions from the UAW to close a labor cost gap with Toyota Motor Corp and other Japanese automakers operating in the United States.

Analysts said the suppliers had a long time to prepare as the talks have been going on for months. Officials with many suppliers echoed that sentiment.

"We're prepared to address our customers' needs, whatever they are," American Axle spokeswoman Renee Rogers said, declining to elaborate.

Others said they will adjust as needed.

"Delphi will make the appropriate adjustments to its customer delivery schedules based on specific site circumstances," company spokesman Lindsey Williams said in an e-mail message.

"With respect to non-GM customers, Delphi will continue to produce and deliver products and services in line with customer schedules and contracts. It is actually too soon to characterize the site-by-site impact at this time."