A Survey of
on the Automotive
Automotive suppliers report widespread operational disruption and drastic measures to preserve liquidity.
In just weeks, management teams at many Tier 1 and Tier 2 suppliers have developed extensive contingency plans to cope with COVID-19 positive employees. Most now consider themselves well-prepared.
Who We Talked to
All portions of Tier 1 and Tier 2 automotive supply chain – including drivetrain, interiors, transmissions, electrical systems, body panels, and other manufactured products – are experiencing similar pressures: disrupted operations, supply chain pressures, and dwindling liquidity. Executives describe a promising start to 2020 that has been replaced by substantial doubt and uncertainty.
Across the board, executives describe COVID-19 as highly impactful to their company as well as to the industry. Suppliers have reduced to skeleton staffs and are taking drastic measures to weather the storm until assembly lines restart. Even once that happens, most executives do not expect a full recovery for months or years.
Unprecedented Disruption to Production
Suppliers have implemented reduced shifts, furloughs, and layoffs to manage an unprecedented disruption in operations. Most executives have never before experienced the current production levels, and estimates of a return to more “normal” production levels ranges from 4 weeks to 16 weeks. The debate over what will be considered “normal” remains unsettled.
Prepared to Deal with COVID-19
Notwithstanding these unprecedented measures, Tier 1 and Tier 2 suppliers are now generally prepared to deal with a COVID-19 positive employee in their facilities. Most executive teams have developed plans for ramping up production levels, manage staffing, and provide for business continuity. All executives are focused on cash and many have implemented or expanded measures to forecast and preserve liquidity.
Bolstering the Balance Sheet
In addition to decreased levels of production, many Tier 1 and Tier 2 suppliers are experiencing a delay in payments from their customers, further heightening liquidity concerns. Executives are actively considering third party capital alternatives as a source of incremental liquidity should the need arise. At current production levels, most Tier 1 and Tier 2 suppliers expect a need for third party capital in 2 – 8 months.