DETROIT -- The death of General Motors' planned line of rear-drive cars is another hit to suppliers at a time when few can afford such pain.
Program terminations are costly to suppliers that spend heavily for engineering and development. But the demise of the Zeta program is particularly painful because many suppliers that rely on GM business are facing unprecedented financial stress as the automaker cuts production.
Zeta was to be the basis of the next-generation Pontiac Grand Prix and GTO; the Chevrolet Impala, Monte Carlo and a new version of the Camaro; and other vehicles, industry sources say. GM killed plans for the program to preserve resources for its next generation of large SUVs and pickups.
"GM is increasing the risk of doing business with them," says consultant John Henke Jr. of the impact on suppliers. "Without some kind of relief, suppliers will be skittish about moving forward on new GM programs." Henke is president of Planning Perspectives Inc., a consulting firm in Birmingham, Mich..
Two of the largest parts makers in line for Zeta contracts were axle and driveline supplier American Axle & Manufacturing Holdings Inc. of Detroit and TRW Automotive Inc. of Livonia, Mich., which was to supply the brakes.
The companies would neither confirm nor deny their involvement with the Zeta program.
But TRW spokesman Manley Ford was quick to point out that the company is sufficiently diversified to minimize losses when a program is scrapped. GM accounted for 11 percent of TRW's global sales of $12.01 billion last year, he says.
Smaller suppliers also could be hurt by GM's decision. Lacks Enterprises Inc. of Grand Rapids, Mich., was in line to obtain contracts on wheel trim for three Zeta lines. A spokesman declined comment.
It is not clear how much money, if any, suppliers may have shelled out in preparation for the Zeta program.
In one case in which a supplier built a plant only to close it after GM announced cancellation of a slow-selling vehicle, the cost was high.
Inalfa Roof Systems Inc. of Auburn Hills, Mich., spent $10 million on plant and equipment to supply the GMC Envoy XUV. GM has canceled the vehicle, and Inalfa has asked GM for a reimbursement.
GM spokesman Tom Wickham confirmed compensation talks are under way with Inalfa but declined to provide details.
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