Troubled supplier services

Within the automotive industry, there are serious issues and significant risks — but opportunities as well.

Troubled Supplier Services

What troubles this industry?


Globalisation and consolidation have not yet delivered positive impact on the overall health of the industry. The sector is challenged by serious, complex, intermingled—and often structural—issues. Some tactical solutions are having the unintended consequence of worsening—and in some cases, institutionalising—issues. Liquidity crises and pressure from lenders and shareholders compound the problems.

What are the risks?


Structural issues are manifesting themselves into increased risk and volatility: pressure on industry "top-lines", competitor "bottom lines" and the fragility of a globally interconnected supply chain. Given competitive intensity, there is little margin for error. At stake is more than global competitiveness; we are facing future viability for some, and overall industry structure in general. Increased risk, however, is not synonymous with "doom & gloom".

What can be done?


The automotive sector should not be viewed only as negative—there are ample opportunities as well. All industry participants are affected, but not equally. Weaker players are the most exposed. Secure participants have an opportunity to solidify their positioning. Now is the time to act.

If this is your situation:


Financial indicators

  • Bank covenant violations
  • Reorganisation / bankruptcy rumors
  • Business / production interruptions
  • Accounting irregularities
  • Rating agency (e.g. Moody’s, S&P) downgrades
  • Lack of cash
  • Covenant rewrites / amendments to credit agreement
  • Nominal cushion on debt covenants
  • Covenant compliance due to non-operating / one-time transactions
  • Skewed debt-to-equity or other capital structure ratios
  • Continuous poor financial performance, late reporting
  • Erosion of shareholder’s equity
  • Audit qualifications, breakdown in internal controls

Operational indicators

  • Production interruption caused by internal or supplier issues
  • Unable to launch new product
  • Containment and/or third party inspection
  • Unable to achieve Run@Rate and capability
  • Slow response to internal and customer quality concerns
  • Insufficient collaboration with OEMs and suppliers on price downs and cost-cutting initiatives
  • Excess inventory as buffer to suppliers and customers
  • Re-sourcing issues (relocating tooling, renegotiating pricing)
  • Senior management consistently fail to execute
  • Resource issues—key management turnover, headcount and skill sets
  • Business decisions based on short-term survival
  • Negative trend in supplier QCD metrics
  • Acquisition, integration or consolidation pressures
  • Loss of existing and new business

How PricewaterhouseCoopers can help you


PricewaterhouseCoopers (PwC) provides a comprehensive service offering of both financial and operational turnaround solutions directly to troubled automotive suppliers as well as helping Tier 1 businesses with their supply base.

Companies facing financial challenges have benefited from our wide array of solutions including financial advisory, restructuring, and refinancing services. Additionally, operational effectiveness services include solutions for supply chain management, process improvement, and cost realignment. PricewaterhouseCoopers helps suppliers move from distress to success.

Broadly speaking, we can address all of your business restructuring needs.


By using our early warning system, we are able to provide a comprehensive service offering of both financial and operational turnaround solutions:

PwC CAR**
  • Financial advisory
  • Liquidity and cash management
  • Business plan formulation
  • Financial restructuring
  • Assist with refinancing efforts
  • Distressed M&A
  • Out-of-court restructuring
  • Chapter 11
 
PwC operational effectiveness services
  • Supply chain management
  • Strategic supplier resourcing
  • Process improvement
  • Launch efficiency
  • Cost realignment
  • Containment and stabilization
  • Operational restructuring


For additional information, including case studies and how we can specifically assist your organisation, please contact us:

PwC CAR**


Michael Milani
CAR managing director
Chicago, IL
Tel: +1 (312) 298-2755
 
PwC operational effectiveness services

Calum Semple
Troubled supplier services leader
Toronto, Canada
Tel: +1 (416) 815-5325
 
International


Americas:
Calum Semple
Troubled supplier services leader
Toronto, Canada
Tel: +1 (416) 815-5325

Asia:
Paul Kirk
Troubled supplier services leader
Melbourne, Australia
Tel: +61 (3) 8603 3591



**Services provided by PricewaterhouseCoopers corporate advisory and restructuring LLC (PwC CAR). PwC CAR is indirectly owned by PricewaterhouseCoopers EE Holdings B.V. PwC CAR is a member of the NASD and SIPC. PwC CAR is not engaged in the practice of public accountancy.