DETROIT -- When General Motors and Ford Motor Co. slashed production this month it hit small and medium-sized suppliers like a ton of bricks.
Pain shot through the entire supply chain, leaving Tier 1s such as Delphi, Dana, Dura, American Axle and Visteon wincing.
But the real victims are Tier 2s and Tier 3s dependent on GM and Ford, such as Sennett Steel Corp. of Madison Heights, Mich., and BBi Group of Bloomfield Hills, Mich., a small supplier of sound insulation and interior trim.
In this crisis, the small fry have nowhere to turn.
"Small companies are much more likely to get into trouble" under these conditions, turnaround specialist Jerry Barefoot says. "The big companies owe too much to fail."
While some Tier 1s have eaten through their credit lines and threaten to exceed debt limits, they also are getting a lifeline from their bankers. Tier 2 and Tier 3 companies are on their own.
GM increased already-announced production cuts for the first three months of this year from 9 percent to 12 percent compared with the first quarter of 2004 and cut output 10 percent in the second quarter.
Ford added to first-quarter production cuts and cut output 1.2 percent in the second quarter.