U.S. auto suppliers’ supply base won’t return to profitability until 2011 at the earliest if prices of oil and raw materials continue to rise. That’s the conclusion of A.T. Kearney in their 12th annual automotive study. The consulting firm say nearly one-third of the 105 studied publicly traded auto suppliers are already in financial distress.
The study projects North American suppliers will amass combined operating losses of up to $50 billion between now and 2011 – assuming suppliers will be able to pass along 35% of their higher materials costs to customers.
Those suppliers will need to find $38 billion in new capital over the next five years to stabilize operations, but tight credit markets and scant interest from private investors could make that capital hard to find.
A.T. Kearney expects U.S. auto sales to bottom out at 14.1 million light vehicles next year, an estimate in line with other recent forecasts.