Paying habits worsen

Defaulting debtors put pressure on suppliers and car dealers

German car purchasers are finding it more difficult to pay their debts in recent months.

But "manufacturers increasingly shift risks on to their [supplier and dealer] partners," said Volkhard Emmrich of Dr. Wieselhuber & Partner, a management consulting company in Munich.

Suppliers and dealer partners of automobile manufacturers complain about outstanding debts of, in some cases, a few million euros and about continuing delays in receiving payment.

"It is scandalous how the economy has been slowed down because original equipment manufacturers' paying habits are getting worse," said Wolfgang Meining, director of Forschungsstelle Automobilwirtschaft (FAW), an auto industry research group at Bamberg University.

According to the results of its so-called Supplier Satisfaction Index 2003 conducted by the university team, up to 15 percent of suppliers' invoices are not paid within a year.

Many suppliers have major problems obtaining payment for services from automakers, said Helmut Kostal. He is the suppliers' spokesman at the Verband der Automobilindustrie (VDA), the industry trade association, and also managing director at supplier Helmut Kostal in Luedenscheid.

Costs for development, tools and equipment are often not paid on time, he said.

The financial sector is also troubled by debtors' behavior.

Susanne Graessle from Frey Financial Services GmbH in Stuttgart said that debtors are becoming increasingly careless. With car loans and leasing contracts the number of debtors in default is rising in both the business and the private sector.

Many car dealers have to face problems on two levels.

"Manufacturers' instructions result in delayed payment to dealers," said Hans-Joachim Flohr from Opel Aurego in Wuppertal. And the number of new-car and used-car customers who don't pay their debts on time is increasing.

According to a recent study by Buergel, an economic information service, the number of legal actions taken against private debtors in 2002 reached a record 1.4 million cases.

"Specifically the automotive business is affected," said Buergel manager Johan Zevenhuizen.

Tags: Retail

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