JIT is truly, only as strong as its weakest link...
Posted on 12/12/2008 5:29:44 AM PST by Liberty1970
SOME CHRYSLER SUPPLIERS THREATEN TO HALT DELIVERY…Chrysler LLC says “quite a few” of its suppliers, including a big oil company and a utility, have demanded cash on delivery for parts and services, and some have threatened to stop shipping parts, says the Associated Press.
Sen. Kit Bond (R-Mo.) says Chrysler told him that its suppliers may demand cash up front as early as Monday. CEO Tom LaSorda and CFO Ron Kolka tell AP that Chrysler has resisted such demands because it can’t afford to accelerate payments. The halt of parts from even one key supplier could stop Chrysler’s auto production, thus forcing the company into bankruptcy and immediately affecting its other suppliers.
Suppliers tend to insist on cash on delivery if they believe a customer is close to bankruptcy. When a company files Chapter 11, unpaid vendors become unsecured creditors who could wait several years to be paid a small fraction of what they are owed. By contrast, suppliers who deliver parts after a company enters bankruptcy can expect to be paid.
Some suppliers also have been pressing General Motors Corp. to pay up front for parts, but the company has so far refused those requests, according to news reports. GM typically pays suppliers about 45 days after delivery.
…AS CASH RUNS DANGEROUSLY LOW. Without federal loans, Chrysler LLC could have trouble paying its bills this month or next, according to wire service reports. CFO Ron Kolka told Bloomberg News that Chrysler could struggle to make it to year-end in the absence of federal aid. He says the company is burning through cash more quickly than it expected because of plunging U.S. auto sales.
The company has said previously that its cash will drop to $2.5 billion by year-end, the minimum needed to meet day-to-day expenses. Kolka told the Associated Press that January payments would pose a “big problem.” Kolka tells the AP that owner Cerberus Capital Management can’t give Chrysler a big cash infusion, as some lawmakers have suggested, because its internal rules limit the amount doled out for any individual investment.
I expect the UAW to demand a pay raise and threaten a strike.
GM RETAINS BANKRUPTCY COUNSEL. General Motors Corp. has hired several prominent restructuring advisors as the company faces a liquidity crisis, says today’s Wall Street Journal.
The company advised Congress last week that it needs $10 billion in government loans to avoid insolvency during the first quarter of 2009.
The Journal, which cites unidentified sources, says GM has retained Jay Alix, co-founder of Birmingham, Mich.-based turnaround firm Questor Management Co.; William Repko, senior managing director of investment bank Evercore Partners; and Arthur Newman, co-head of restructuring at private equity and advisory firm The Blackstone Group. Blackstone and Evercore are based in New York City.
The newspaper also says the company has hired bankruptcy veteran Harvey Miller, a partner at New York City-based law firm of Weil Gotshal & Manges, and Martin Bienenstock at the law firm of Dewey & LeBoef, who worked on the Enron bankruptcy. The automakerconfirms only that it has hired “appropriate advisers for all contingencies.” GM director Kent Kresa, former chairman of Northrop Grumman Corp., tells the newspaper the board has considered bankruptcy but voted at a recent meeting to dismiss that option, at least for now. The board believes consumers wouldn’t buy vehicles from a bankrupt automaker, Kresa says.
AUTO STOCKS BATTERED ON LOAN FEARS. The shares of automakers and suppliers posted steep declines yesterday amid modest losses in the broader stock market. Analysts say auto investors were worried about the fate of legislation to provide emergency loans to Chrysler and General Motors.
Shares of Ford and General Motors fell 11% yesterday to $2.90 and $4.12 per share, respectively. Other OEM stocks were mixed in U.S. trading, including Daimler (-3%), Honda (+4%), Nissan (-1%) and Toyota (+2%).
In Asian trading after news of the failed bailout, shares of Honda, Nissan and Toyota fell 13%, 11% and 11%, respectively. The stock of suppliers Denso and Bridgestone dropped 11% and 10%. Hyundai was down 7%.
Fitch Ratings warned yesterday it was considering the downgrade of seven suppliers it deems vulnerable to a GM bankruptcy. Shares of all those companies dropped yesterday in U.S. trading, including American Axle (-6%), ArvinMeritor (-13%), Johnson Controls (-8%) and Tenneco (-11%). Also posting big declines were Federal-Mogul (-13%) and Lear (-19%).
What happens when Uncle Sam won’t give you cash to substitute for lousy sales.
>>I expect the UAW to demand a pay raise and threaten a strike.<<
Oh isn’t that the truth!
My own preference would be for the OEM’s and unions to agree to pull in the wage-reductions and other union concessions from 2010 as planned to ASAP (like, tomorrow). This would eliminate the unions as a whole point of contention. It’s ridiculous at this point for the unions to try to hold on to 12 more months of high pay given the stakes.
This would be like me complaining that my credit card companies have begun calling me and saying they won´t provide more services until I pay them back.
Since they are selling the ones they have already built why will this matter ?
Possibly. But I also expect the Congress to threaten Chrysler’s suppliers. Like Bank of America was threatened in the recent labor sit-in. Fascism is growing apace as the evil progressives accelerate their takeover of industry.
Congress has no authority to be 'lending' money, not a dime of which will be paid back IMO btw, to ANYONE.
If they want to 'save' GM, let the Feds order 3 million cars at MSRP.
While that would be stupid, pointless, and only delay the inevitable, it would at least be Constitutional.
L
Bush will throw a tarp over it.
“The halt of parts from even one key supplier could stop Chrysler’s auto production”
So the idiotic and insane (Just in Time delivery) program comes back to bite ya in the ***.
Well it’s about **** time !
Stupid, idiotic programs litigated from Unions to put the crimps on all out sourcing.
Erase the Unions - Erase the problems
The unions have nothing to do with JIT sourcing. Non-union shops are just as involved with the JIT system (including the transplants).
“Cerberus Capital Management can’t give Chrysler a big cash infusion, as some lawmakers have suggested, because its internal rules limit the amount doled out for any individual investment.”
Oh !, well heck. Please forgive us for suggesting making changes to your Corporations Policy !
“Non-union shops are just as involved with the JIT system (including the transplants).”
I differ in opinion, true or false.
I’ve been in shops all my life as Diemaker and personally know first hand the problems associated with JIT.
And have had repeated discussion/conversation on the subject many times. ie: w/CEO’s
Oil companies have treated the airlines this way for years.
JIT is truly, only as strong as its weakest link...
My position on JIT exactly.
I don’t care if you take a perfectly running tool that finalized it’s run a week ago. If you reset next run, I guarantee it won’t run again. Don’t matter same press,steel,lube, settings ect. Sometimes ya get lucky. Most times ya don’t. Truly a diemakers nightmare. Couple that with the fact the big 3 refuse to allow additional price quota’s to offset tooling issues and you can understand what goes on behind the scenes.
There have been times that we’ve pondered screwing the policy by making deliberate over runs, treating the parts and providing special warehousing to cover our butts on the next shipment.
“to cover our butts on the next shipment.”
I’m sorry, but this issue just has me fired up.
Just thinking of all the times we’ve worked late hours on problem tooling just to make sure parts were available for shipment next morning. And the many times we couldn’t make them available till the last minute, whereby requiring us to airship them. (it ain’t cheap to airship) But it’s a far cry cheaper than shutting down one of their lines I’ll say !
Jeesh, what a waste in policy. Waste of man hours, downtimes, paper work ect.
I don’t remember exactly when JIT was implimented, sometime about 1991-92 I think. Prior to that warehousing was the normal practice. I think it was also about that time ISO 2000 came into being. (what a Joke) that turned out to be. But that’s another story............
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