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Restructurings Likely Amid Short- and Long-Term Challenges Facing Industry, Predicts ABI Journal Article

Alexandria, Va. — The automotive supply industry is likely to face another wave of restructurings amid lower production projections for light vehicles, potential policy shifts and emerging technologies, according to an article in the January ABI Journal. “The pace and extent of change impacting the auto industry is unprecedented, and increased turmoil in the supply chain is highly likely in coming years,” Charles M. Moore of Alvarez & Marsal (Southfield, Mich.) and Scott A. Wolfson of Wolfson Bolton PLLC (Troy, Mich.) write in their article, “Check Engine: Rules of the Road to Navigate Upcoming Auto Distress.”

The most recent restructuring wave to hit the auto supplier industry occurred in 2008-10 as light vehicle sales hit their low point of 10.4 million units in 2009, according to the authors. “Even in good times, suppliers can become financially distressed based on the industry’s historically slim profit margins, which make it difficult to absorb unfavorable variances to a plan,” Moore and Wolfson write.

As vehicle sales have steadily picked up over the past decade to 17.7 million units in 2016, the authors point out that Bank of America/Merrill Lynch recently slashed its forecast for North American light vehicle productions to 13 million units in 2021. Additionally, Moore and Wolfson point to the uncertainty over the future of the North American Free Trade Agreement, “raising prospects that suppliers who have invested significant capital in Mexico will now be forced to move production back to the U.S. in order to avoid heavy tariffs and remain competitive.”

“Longer term, the industry faces an overhaul like nothing it has ever experienced, based on the speed with which ride-sharing, electrification and autonomous vehicles are being adopted,” Moore and Wolfson write. “These short-and long-term challenges will likely result in a number of suppliers having to be restructured.”

To obtain a copy of “Check Engine: Rules of the Road to Navigate Upcoming Auto Distress” from the January edition of the ABI Journal, click here. To speak with the authors about their article, please contact ABI Public Affairs Manager John Hartgen at 703-894-5935 or jhartgen@abiworld.org.

 

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ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes more than 12,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org. For additional conference information, visit http://www.abi.org/education-events.

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