Our Wild Ass Rumor was three days early, but accurate. Our source inside the former GM division and bankrupt autoparts maker reports that the company has told its workers that 600 white collar Delphinians– in the Electronics and Safety organization– will be shown the door by the end of the year. (The total number employed thereabouts is 3k.) Delphi will identify the 600 puntees by the end of this month [August]. And despite previous promises, the pension freeze is now "independent of bankruptcy emergence." And when might THAT be? Our source says there were "no warm fuzzies on when we could expect to emerge." The Delphi wound continues to fester, only more so.

The decline of the US auto market is bad news for OEMs, but as usual shit flows downhill and auto suppliers could take the brunt of the impact. Sven Gustafson blogs an A.T. Kearney survey at MLive.com which says North American auto suppliers could lose up to $50b between 2008 and 2011. Caught between weakening demand for new vehicles and rising commodity costs, the survey estimates that the supplier sector will need $38b in incremental capital over the next five years. Another report by Grant Thornton LLC estimates that the hard times could put a full third of suppliers at risk of bankruptcy. Unsurprisingly, firms in the SUV supply chains face the highest risks thanks to their reliance on weak US sales. "The full impact of very low truck and SUV production in the second half of the year and any new production cutbacks this fall – something we believe is likely – will only make supplier cash flow problems more difficult to manage," saiys Grant Thornton principal Kimberly Rodriguez. And in the past these woes could have been turned around by acquisitions or mergers, but now the key to survival seems to be diversification beyond the auto industry. With credit tight, massive retoolings and turnaround plans also aren't in the cards for many suppliers who have little choice but to focus on successful core business to survive the rough patch. "I'd say things are being looked at very carefully," says Doug Grimm, CEO of supplier Citation Corp. "I think everybody's wondering if we've seen the bottom yet."

Once again, former GM division and bankrupt parts supplier Delphi is proving to be the thorn in GM's side that could well prove to be a lance through its heart. Or something like that. Anyway, Automotive News [sub] reports that the feds are taking steps to sort out Delphi's pension liabilities, and The General could end up with one big ass bill. "In a letter to GM and Delphi, the federal Pension Benefit Guaranty Corp. warned it would lay claim to $8 billion if the automaker does not keep its pension plans intact, the [New York Times] paper said. This would dilute the claims of Delphi's other unsecured creditors, who are owed about $3.5 billion." To forestall that possibly mortal blow, "The U.S. government has asked bankrupt auto parts maker Delphi Corp. to transfer more than $1.5 billion of unfunded pension obligations to former parent General Motors by September 30." Whew! And here I thought we were talking about real money. 

We have it from an insider that the bankrupt parts supplier Delphi is about to "downsize" its domestic ops. Not that it'll do them much good. Now that Appaloosa Investments and Friends bailed-out of Delphi's bail-out plan, the former GM division is on its last life. Although Delphi's suing its jilters, what are the odds that a judge can/will force Appaloosa to fork over the billions the money men didn't leave on the table? At best, more money will be lost on lawyers, all 'round. All of which means a Delphi Chapter 7 is just over the event horizon. GM will have to buy up (back) the Delphi bits it needs to keep building vehicles. And as GM's August 8th SEC filing points out, "In addition the Benefit Guarantees may be triggered which would result in additional liabilities to us. We may also be subject to additional litigation regarding Delphi." The flames of GM's cash conflagration continue… [thanks to you-know-who-you-are for the tip]

High material costs (particularly steel) are wreaking havoc on automotive suppliers, caught between soaring raw materials costs and cost-cutting customers. But the industry is getting a new tool which could help iron-out the most precipitous jumps in steel prices. Automotive News [sub] reports that the New York Mercantile Exchange will introduce a futures market for domestic hot-rolled coil steel this fall. The move could provide more price predictability for the crucial commodity. "The NYMEX proposal is one more option that we will review in determining the most appropriate overall strategy for us," GM spokesfolks didn't reveal. Steelmakers are not thrilled by the plan. They prefer the current method of direct price negotiation, and warn that speculators could drive prices up (it's hard to believe things could be much worse than the doubling of steel prices since December). Steel mill profits have been strong during the period of price increases, and the bankruptcies which once riddled steel production have migrated to steel customers, particularly auto parts suppliers. Though speculation is always a concern, a competitive futures market typically stabilizes market prices and makes downstream contract negotiations far easier.

When is enough, enough? GM has to be asking that about their former subsidiary Delphi. The AP [via Forbes] reports that The General has agreed to lend the parts maker another $350m "so Delphi can maintain a minimum level of liquidity." That brings GM's financial stake in the company they thought they'd dumped spun-off to $900m in loans. And that's on top of the $3.6b they paid out to cover Delphi's UAW pension liabilities. Delphi has been in Chapter 11 since October 2005. Their bankruptcy original plan included exiting Ch 11 this past spring with an equity deal and massive loans. When Appaloosa Management and other investors backed out of a $2.55b equity deal at the last minute, Delphi had to go back to square one. Last week, bankruptcy Judge Robert Drain ruled that Delphi can file a lawsuit against Appaloosa and the other investors. Until that's settled (and assuming the lawyers don't eat up whatever settlement they get), it looks like GM will continue bailing out their largest supplier. The question is, who will bail out GM?

After 70 years of doing business together, Chrysler and driveline supplier Dana appear headed for a nasty breakup. Automotive News [sub] reports that Dana has asked a U.S. Bankruptcy Court in New York to allow it to end its business with Chrysler by the end of this year. Dana, which recently emerged from a two-year bankruptcy, is not divulging the exact causes for the rift. Increasing material costs are said to be a major reason. Dana buys steel and supplies driveline components for Chrysler's Jeep products, as well as its Dodge Viper sportscar, Nitro SUV and Ram pickup. "Our goal is to establish a mutually rewarding supply agreement with Chrysler moving forward," says Dana Chairman John Devine, in a statement asking the bankruptcy court to uphold an earlier agreement between Dana and Chrysler. If negotiations break down, Dana will abandon its business with Chrysler. This latest supplier conflict comes on the heels of Chrysler's nasty divorce from its bankrupt interior supplier Plastech, and reinforces Chrysler's (somewhat undeserved) rep as a notorious supplier abuser. On the other hand, you can't squeeze blood from a stone, and Chrysler's financial situation hardly allows it to practice far-sighted largesse with its business partners. Rock, meet hard place.

In our ongoing campaign to put TTAC at the forefront of automotive journalism, we've decided to go behind the headlines, to provide the kind of insight and perspective that you can't get elsewhere, if only because no one else could be bothered. That's because we know many of our Best and Brightest are just as geeky and OCD as we are. More charitably, what miserly or environmentally conscious pistonhead wouldn't want to know about thermal seat management? After all, as the DOE discovered, if you use less AC, you save mpgs! In any case, here's my interview with Dan Coker, President and CEO of Amerigon, the world's premier supplier of heated and cooled seat technology. For those of you who aren't podcast-compatible, the bottom line: the cool-your-butt business is booming. Amerigon's up to $75m turnover this year. It's an American success story, human ingenuity at its finest, coming to a Sealy Posturpedic near you soon.  

A few weeks back, we told you that some of Chrysler's component manufacturers have been running their plants full bore, even canceling holidays to meet Chrysler's production demands. They've even had to ship parts in cardboard because they didn't have enough of the usual plastic packaging. Now we've learned Chrysler has called a hard stop, throwing suppliers into a tailspin as they halt production lines that were running beyond capacity last week to keep up with orders. Plant managers are scrambling to determine new production levels so they can get lay-offs started as quickly as possible. Is this the beginning of the Chrysler meltdown? We'll keep you up on what's going on as we find out more.

Greg Keenan of the Globe and Mail reports that Chrysler's decision to temporarily abstain from producing trucks and minivans hits Canadian automotive parts-supplier Magna International like a kick in the nuts [paraphrasing]. Despite attempts to diversify its customer base beyond Detroit, Chrysler remains Magna's number one customer. "Magna accounts for about $1,900 (U.S.) worth of parts in the assembly of every Chrysler minivan," Keenan reveals. With Chrysler's Missouri minivan plant closing until further notice, Magna's Missouri minivan seat plant is SOL. Even the street still thinks Magna is too closely linked to the domestics, having bid down the supplier's shares from $100/sh in August 2007 to $60 – $70/sh today– a drop that parallels the drops in value of both Ford & GM. On the bright side, at least they're not Ford nor GM.

Workers at Chrysler's Windsor, Ontario plant breathed a sigh of relief when Chrysler announced they're closing their St. Louis south plant to cut van production. Their relief may be short-lived, though. We've learned through a confidential informant that Chrysler is also shutting down the Windsor van plant through the end of August. This comes after some component plants have been running at full tilt, working overtime, weekends and even the Canada Day long weekend, to meet Chrysler's demands. This was totally unexpected and "scheduling people are running in circles trying to readjust inventories and halt our suppliers." Which plant will be the next to fall? Or will it be Chrysler itself?

Autobloggreen (ABG) is all over Mercedes' EV plans. The tree-hugging bloggers report that Stuttgart's first EV will be an A Class. Digging deeper, it seems that Mercedes will be using a battery pack from Tesla Motors, confirming Elon Musk's hint of a "small deal" with Daimler. The rumor hasn't been confirmed by Mercedes, and ABG points out that Daimler claims to already have li-ion battery thermal issues licked. Furthermore, Continental has been named as the official battery supplier of Mercedes' forthcoming S 400 Hybrid. So we'll wait to hear from official Daimler sources before we credit Tesla with its first supplier contract. And don't even ask when the EV A Class will hit the market. Automobile Woche is prognosticating an industry-standard 2010 release. Battery supply notwithstanding, the A-Class was designed with a "sandwich floor" that can accommodate either fuel-cell or EV conversion. Which means that they're good to go. Or not. 

In 2001, GM named Progressive Progressive Molded Products supplier of the year. Boston investment firm Thomas H. Lee Partners bought Progressive in 2004. With '07 revenues cresting $1.4b in 2007, the company's been a major GM supplier (TTAC is still investigating which parts they make for which GM vehicles). Yes, well, like so many other suppliers, Progressive got stuck between rising raw material costs and declining prices. Progressive filed for Chapter 11 on June 20, listing $500m in debt vs. $50m worth of assets. And now, as the court prepares to liquidate the supplier, GM has asked for court approval to seize tools from Progressive. Reuters reports says GM's filing cites "potential supply disruptions" that could "force the carmaker to shut its assembly lines." "The tooling is essential to ensuring the production of the component parts GM's assembly lines depend on," GM said in court papers, describing the company as a "single-source" supplier. You may recall that a federal bankruptcy judge withheld supplier Plastech's tooling from Chrysler, which forced ChryCo to temporarily suspend production. That's all GM needs right now. Or, strangely, maybe it is. 

Ha! So close, yet so far. American Axle CEO Dick Dauch's '07 paycheck– $5.55m salary and a $8.5m bonus– doesn't quite eclipse GM CEO Rick Wagoner's $14.4m compensation. But hey, what's $350k between friends? And, it must be said, that's a lot of money– even if Dauch did break– sorry, "settle" a three-month strike by cutting half of AA's 3,650 member unionized workforce, instituting a two-tier wage system (lowering newbie wages by roughly 50 percent) and "convincing" GM to kick-in $215m to pay for bailouts. As AA's independent compensation committee put it, the bonus "took into account the company's strong financial performance in 2007, the structural transformation achieved under our new labor agreements with the UAW and… Dauch's leadership role in these negotiations." There, that sounds better. Neither the UAW nor American Axle's president (Dauch's son, appointed post-strike) were available for comment. Meanwhile, well done to The Detroit News for not totaling the CEO's compensation for their headline. There's only such much shock and awe Motown can take these days. (P.S. Isn't it amazing how all this big bucks salary stuff comes out during the weekend?)

In the car biz, tire makers are something of a canary in the coal mine. And they're coughing like crazy. As America's car market falters, tire manufacturers are facing some plenty tough choices, as they try to manage rising prices and falling demand. Goodyear, America's largest tire company, is seeking relief abroad. Trading Markets reports that they're focusing on growth in foreign markets like Russia, China and Brazil, investing $500m in Chinese production and $600m on plants in Brazil and Chile. Goodyear hopes the investment will pay off with over $2b in savings by 2009. Some of those savings will come from plant closures (e.g. Australia) and longer-than-usual summer production lulls at plants worldwide. Meanwhile and in any case, most tire makers are increasing their prices. Bridgestone, Goodyear, Hankook, Yokohama, Michelin and Continental have all announced some kind of price increase this month alone.