DETROIT -- Auto suppliers will need cash infusions of $17 billion to $33.5 billion over the next two to four years to avoid a wave of bankruptcies, according to an A.T. Kearney Inc. study released today.
Tier 1 suppliers, nearly all of whom are strapped for cash as production has plummeted since last fall, will need the cash to ramp-up and sustain their operations as demand increases.
In March, the federal government approved a $5 billion bailout program for the supply chain, but so far it has failed to bring relief as funds get snarled in government red tape.
According to Automotive News research, six Tier 1 U.S. suppliers have filed for Chapter 11 protection so far this year compared with eight during all of 2008. Wheel maker Hayes Lemmerz International Inc. filed for protection on Monday.
The Chicago-based consulting firm expects U.S. auto sales to rebound to more than 16 million vehicles by 2012 from pent-up consumer demand, though the firm expects 2009 sales to drop 24 percent to 10 million units.
A disorderly wind-down of key suppliers could also potentially shut other OEMs, A.T. Kearney partner Dan Cheng said in a statement, adding he expects the government will do everything it can to help the industry.
The study also said suppliers will see profitability in 2011, but the sector will collectively lose $23.7 billion in 2009.