Loans are little, late for some suppliers

The federal loans for General Motors Corp. and Chrysler LLC mean cash-strapped parts makers will get paid and offers them some breathing room heading into next year, when they’ll confront their next challenge as automakers slash production.

But some suppliers won’t make it until then.

Cadence Innovation, a Troy supplier of plastic interior parts that filed for bankruptcy in August, plans to close its doors by the end of the month, according to a company memo the Free Press obtained.

The company counted GM and Chrysler as its largest customers and had about 4,000 workers when it filed for Chapter 11 in August; 1,500 of those workers were in Michigan.

A Cadence spokesman did not respond to requests for comment Friday.

Having failed to sell its assets, Cadence is among dozens of automotive firms in bankruptcy, and could be joined by more despite the federal loans announced Friday, industry experts say.

The next major challenge will be surviving production cuts early next year, as automakers limit their products to meet weak demand for vehicles amid the recession. But the cuts will threaten to drain already low cash reserves for suppliers, said Craig Fitzgerald, auto analyst and partner at Plante & Moran.

Financial pain in the supply base has spread from small to large suppliers.

Federal-Mogul Corp. said Friday that it will cut about 4,600 jobs, following the 4,000 job cuts it announced in September.

Even in their weak state, suppliers are among the many stakeholders that are expected to offer concessions in exchange for the loans.

But many suppliers won’t have much to give, said Nicole Lamb-Hale, managing partner of the Detroit office of Foley & Lardner LLP.

“It’s very important that there be a constituent at the table to talk through the impact of any concessions on behalf of the supplier community,” she said.

Suppliers could be asked to extend payment periods for the automakers, cut prices and take on more engineering or tooling costs.

Fitzgerald said few suppliers will be able to withstand those demands. “Revenues are just bottoming out, very quickly,” he said.