Kirk Johannesen, The Republic
johannesen@therepublic.com
The automotive industry downturn has affected more than 2,000 workers in Bartholomew County, but a local economic official said he believes the community has fared better than others.
"I think our companies for the most part showed restraint in layoffs and cutting hours," said Corey Carr, president of Columbus Economic Development Board.
This has put the companies in a better position for when production increases, Carr said.
Massive disaster among suppliers nationwide was averted because of a $5 billion cash infusion from the federal government and timely payments to suppliers by General Motors and Chrysler.
Some suppliers report sales increases and believe better times are ahead this year.
CAPCO, a Columbus company that makes safety parts for automakers such as Toyota, is nearing completion of a $1.5 million, 12,000-square-foot expansion. The joint venture with Itsuwa USA will apply a special coating to CAPCO's parts.
Despite laying off 45 in October and having 50 fewer employees than it did before layoffs began, CAPCO has recalled some workers because of Toyota's strong Camry sales, said Jeff Elkins, facilities manager.
However, industry officials warn that a ripple effect of more closures or layoffs could occur because of GM and Chrysler idling plants this summer.
Chrysler, which exited bankruptcy June 10, canceled its contract with Cummins Inc. for production of a light-duty diesel engine at Plant 1, although Cummins said the parties are renegotiating and that the project is officially delayed - not canceled.
And Columbus Components Group, a metal stamping plant that supplies parts to Cummins, announced that it would close July 31.
Uncertainty remains
The length of the recovery is unclear, said John Graham, dean of Indiana University's School of Public and Environmental Affairs.
U.S. auto sales have collapsed from a peak of 16 million to 17 million units per year in 2007 and 2008 to an estimated 9 million to 11 million this year, Graham said.
"The recovery is expected to begin in 2010 but it may be very slow. It may be 2013 to 2015 before the 15 million mark is approached again," he said.
Hundreds of companies across the country make everything from bolts to axles and transmissions, shipping them to Ford, GM and Chrysler factories and foreign automakers with U.S. plants.
Some supply parts to others that make larger components, creating a chain of companies that many thought would snap if payments were interrupted to firms.
About 20 suppliers have filed for bankruptcy so far this year, but most suppliers have hung on despite bankruptcies of Chrysler and GM.
"There was not the Armageddon that could have been there," said Chip McClure, chairman and CEO of Arvin-Meritor Inc., which makes parts for cars and heavy trucks.
Before filing for bankruptcy, GM made payments to suppliers early, which also helped cash-strapped companies avoid trouble, said Dave Andrea, vice president of industry analysis and economics for the Original Equipment Suppliers Association.
Many are at risk of trouble again. If the factories are not running, suppliers have no income, and there's a 45-day lag between when they ship parts and when they are paid.
The Obama administration recently denied a request by auto suppliers for up to $10 billion in additional federal aid to help the parts companies deal with the bankruptcies of GM and Chrysler.
McClure said the total collapse of the supply chain, which employed more than 500,000 people nationwide last year, is not likely now, although more bankruptcies are coming, especially for companies that mainly depend on GM and Chrysler.
Fuel prices will play a big role, Graham said.
"If they remain below $3 per gallon, the market will favor pickups and SUVs," Graham said. "If they rise above $3 per gallon and stay there, small cars and hybrids will get a boost."
Local optimism
Rightway Fasteners officials are pleased that their orders have increased in May and June, but the company is careful about thinking it has escaped the clutches of the downturn.
The company makes fasteners such as bolts and screws, mostly for Toyota and Nissan but a small amount for GM. Sales have slowly increased since January, but despite the gains are down about 40 percent from 2008.
"From what we see, we think we'll continue to increase (sales)," said Wade Klingler, director of human resources and administration.
However, Klinger said the forecasts that serve as the basis for production levels are not as accurate as they used to be, which makes planning more difficult.
The volatility of the auto industry has caused Rightway to cut temporary workers, reduce employees' hours, ask for voluntary layoffs and leave positions unfilled.
"This is completely new for us because we've always been trying to keep up with Toyota and expanding every other year until this downturn," Klinger said.
Sunright America, which makes fasteners such as nuts and bolts, is hiring more employees because sales to Toyota have increased.
The company cut workers' hours in February instead of laying off employees, so retaining everyone and hiring more have been good signs, said Teresa Straughn, Sunright America's human resources manager.
"We've seen Cummins' Walesboro plant and CCG (Columbus Components Group). We're very fortunate," she said.
The Associated Press contributed to this report.