As US auto starts booming again time to bailout weaker Tier 1 Tier 2 suppliers who could not globalize

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When US auto sales declined from 17 million in 2005  to a low of 10.5 milliom in 2009 the suppliers whether Tier 1 or Tier 2 got squeezed. The demand for lower costs and market contraction meant that  weaker auto suppliers barely stayed alive and certainly could not globalize into low-cost locations. There was neither hope nor cash to expand globally.

The top quartile (25%) of suppliers to auto industry were strong and continued their low-cost global expansion and they are fine as auto recovers in the US. The average age of  a car is at an unprecedented 10 years – unthinkable  in the US where 4% of the GDP  was spent on auto which declined to about 2.5% of GDP .  Auto sales  are expected  to pick up from 10.5 million to  between 13-15 million autos in 2011 and auto companies are smiling. Ford has record profits while GM is on course for an IPO that will repay the bailout money. But what happens to the lower 75% suppliers ?

The top 25% suppliers have become stronger with global low-cost operations and the  bottom 75% are floundering. If these weaker auto suppliers close – there would be more US job losses and the good news of  auto sales pick up will not extend to the  auto supply chain jobs.

Is it time to bailout/support  the weaker auto suppliers ? Something to look at.

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