Could a small supplier bankruptcy spark a catastrophe?

Edward LaphamEdward Lapham is executive editor of Automotive News
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Now I know what Europe was like right before World War I.

Well, sort of.

The entwined partnerships and other relationships among automakers and suppliers are like the Triple Alliance of Germany, Italy and Austria-Hungary vs. the Triple Entente of England, France and Russia in 1914.

You could sort primarily-Detroit 3 suppliers into one camp and primarily-transplant suppliers into another, but why bother? Straightening out the co-mingled, cross-border business relationships would be like trying to sort out the family tree of European royalty.

Remember that a century ago things were so entwined in Europe that the June 28, 1914, assassination of Archduke Franz Ferdinand, heir to the Austro-Hungarian throne, touched off the First World War. The archduke and his wife were killed in Sarajevo by a Bosnian. But that was incidental. It could have happened anywhere.

Now, with so many suppliers at the tipping point of insolvency, a Chapter 11 filing by a small but well-connected supplier could plunge the North American auto industry into a chain reaction of bankruptcies and massive financial disruption.

This small supplier might file in federal court for the Southern District of New York, though it could happen anywhere.

The bullet in the head could happen when you least expect it. Does it really matter who fires it?

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