DETROIT - The demise of Engineered Plastic Products Inc. stunned many minority-owned auto suppliers, underscoring their uncertain future as the Detroit 3 automakers shrink.
For more than 15 years, Engineered Plastic Products, owned and founded by Gerald Edwards, was successful. General Motors awarded Edwards five consecutive supplier-of-the-year awards from 1999 through 2003.
But last year the plastics parts maker in suburban Detroit suffered a $2.5 million cost overrun on a product launch that led to a Chapter 11 filing in March. The company shut its doors June 30.
"He was the best of the best," Glenda Gill said of Edwards. Gill is executive director of the automotive project for the RainbowPush Coalition in Detroit, an advocate for minority suppliers.
"And if it could happen to him, lots of minority suppliers are looking at that and asking, 'What could happen to us?' "
Gill says that in recent months, many minority suppliers who have been considered successful have confided to her that they face dire financial situations.
Although auto suppliers in general face tough times, the problems facing minority suppliers to GM, Ford Motor Co. and the Chrysler group go to the heart of the way minority-owned companies are structured.
The typical solutions that experts suggest - diversification into other customers, industries and product lines - are difficult even in the best of times. Minority-owned suppliers also face different hurdles with foreign automakers, particularly in the South.
"I think the minority supply base is probably in bigger trouble and peril than the regular supply base," said Dave Bing, a former star in the National Basketball Association who now is CEO of Bing Group in Detroit. "I think we are at a crossroads."
U.S. automakers are under no legal requirement to conduct a specific level of minority contracting. But if an automaker does business with the federal government, it is required to spend a certain amount each year to help the socially disadvantaged. Automakers also remain under public scrutiny from groups such as RainbowPush to improve minority contracting.
But minority suppliers face several disadvantages in adjusting to global competition. They tend to produce commodities - low-margin, high-volume parts. Those parts are under the most severe pricing pressure from overseas.