Ford, GM To Sharply Cut 2nd Quarter Output, Small Auto Supplier Expected To Be Hurt Hardest - Ford Motor Co., General Motors Corp

General Motors and Ford Motor announced plans to curtail vehicle production in the next to the first quarter, after sales of cars and light traffics slowed in February. That could push many of the smaller auto composing suppliers to the brink. "It's survival of the fittest on the outside there," said David Healy, an auto industry analyst with Burnham Securities. "The natural issue is more consolidation."

Ford said it will make an incision in production in the quarter through 17 percent. The company plans to bring out 980,000 vehicles next quarter compares with the 1176 million made a year ago. First-quarter production will be 1035 million. Ford said nearly half of the planned production wounds is from not repeating last year's production increase aimed at boosting inventories. The remainder is the originate of moves as part of Ford's revitalization plan and lower F-series production amid the summer launch of the redesigned F-150 pickup traffic America's best-selling vehicle.

As a come of growing inventories, General Motors Corp., whose sales sanguinary 19 percent in February, said it would make an incision in its second-quarter production in North America by dint of 11 percent to 1.39 million vehicles.

The number of automotive suppliers has dwindled above the past decade to about 10000 in 2000 a third of what it was in 1990 by the agency of the end of this decade, alone 4,000 to 5,000 suppliers are wait fored to remain, the Original Equipment Suppliers Association (OESA) predicts.

Forecasts for slower auto sales and production in 2003 especially if consumer worries about a looming war with Iraq persist beyond the next to the first quarter, will compound the crushing on suppliers, which are already receiving lower prices from automakers for their parts.

"The small and middle market players are going to really feel the pinch. What they were making up upon volume, they were giving away upon price," said David Eberly, senior managing director of Beringea, a private equity and investment banking firm told Reuter Companies with annual incomes of $10 million to $100 million are the greatest in quantity vulnerable, especially the hundreds of mom-and-pop operations specializing in metal stampings, injection-molded plastics and electrical parts, said Eberly and others. "You will diocese suppliers hit bank covenants. You will diocese some acceleration of the consolidation run because of this," said J Ferron automotive partner for consulting firm PricewaterhouseCoopers.

At the same time, top suppliers stand to gain at the outlay of their smaller competitors. Automakers have indicated a desire to work with fewer suppliers and incorporate larger module and a whole s into their vehicles, a incline that has benefitted big suppliers.

"There are a number of actual large, tier one and tier sum of two units suppliers that are expecting convolution increases" as competitors go without of business, Eberly said. He noted that could place a strain on their production capacity, a situation that "we haven't seen in a while."

Suppliers said they are bracing for the production slowdowns, which are awaited to be announced by the automakers upon a weekly, plant-by-plant basis. "We're waiting to diocese how many units they are going to reduce" said Greg Gardner, spokesman for Visteon Corp., whose largest customer is former parent Ford.

American Axle & Manufacturing Holdings Inc., which derives about 84 percent of its sales from GM said it foresees no major changes for the light traffics and sport utility vehicles it supplies.

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