The automotive industry has recently enjoyed a strong period of
sales growth and productivity. But even during
this period, some manufacturers and raw materials suppliers
continue to face pressures presented by financially troubled
customers and suppliers. Witness for example the recent chapter 11
filings of Lee Steel Corporation and Chassix Holdings, Inc. In
order to manage supply chain contracts during this period,
manufacturers should identify early signs of financial distress in
their customer or supplier base and quickly react to that distress
in order to successfully navigate through stressful times.
Manufacturers should watch for supplier requests for price
increases, accelerated payment terms, or customer financing
support. In addition, a manufacturer's failure to effectuate
cost reductions, a deteriorating market position, and changes in
key management positions are all factors that may indicate
financial distress. Manufacturers should employ unique
