Could Delphi Bring Toyota to Its Knees?

January 13, 2006
The coming week could be a big one at Delphi, as it struggles to cut costs without pushing its UAW workforce to walk out. Either way, the ultimate resolution could be tough for General Motors. As part of a settlement, it may have to cover pension costs – or more – for thousands of Delphi employees. A strike, meanwhile, would result in parts shortages that could quickly bring GM assembly plants to a halt. Ironically, a Delphi strike wouldn’t be entirely bad for the giant U.S. automaker.

It turns out Delphi is one of the top three suppliers for GM’s Japanese archrival Toyota. “Delphi is really important for us,” confirmed Toyota media relations manager Dan Sieger. “If it runs into problems, it could hurt us, too.” Delphi has six major plants specifically serving Toyota’s North American assembly lines, providing the Asian maker with the likes of steering columns, vehicle sensors, climate control components, and other important bits and pieces. Those goods go into critical models, including the Avalon, Corolla, Matrix, Sequoia – and the all-new Camry. Toyota would certainly like to avoid problems that could foul the launch of that hotly touted sedan.

“We’ve been in close contact with Delphi management,” noted Sieger, who stressed that Toyota is “always monitoring the situation.” So far, it has not taken steps to develop alternative sources. That’s always a possibility, though not an easy or quick one, industry watchers caution.

Though Japanese “transplants” originally tended to do deals with Japanese partsmakers, traditional U.S. suppliers have been gaining traction in recent years. The list of other top Toyota suppliers includes Lear Corp. and Visteon, another sorely troubled giant. Indeed, Sieger estimated that there are at least 14 suppliers to Toyota’s North American plants who are now operating under Chapter 11 protection. Another Toyota source said the figure could be higher. As with airlines, bankruptcy is no longer the stigma it once was. It’s “certainly a factor” when considering whom to give a contract to, said Sieger, “but we have to look at a variety of other things and then weigh them together.” Cost and quality, he stressed, are critical concerns, but “Ultimately, we need to ensure a steady supply of parts to our plants."

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