Auto supply firms weathering storm, survey finds

Despite enduring an economy that’s been labelled the worst in history, a financial survey of Ontario’s automotive supply chain reveals a sector that has managed to avoid drowning in its own red ink.

A Canadian Association of Mold Makers/automate Canada survey released this week is the first look at the financials of the sector.

“It was manageable in most cases,” CAMM president Mike Bilton said of the financial damage. “It was more positive than negative.

“It was nice to see most companies were holding on tightly to their cash position. Making sure they’re making decisions wisely based off deliveries and revenue recognition models and they were able to have some money in the bank through all of this.”

With companies facing a variety of payment terms and schedules, Bilton said it was impressive how companies managed cash flow challenges.

The prudent financial management has left the supply chain intact and preparing for the automakers resuming production the week of May 18.

“Having money in the bank and being able to pay your employees until you can take advantage of those government-funding streams, everyone took a modest approach to it,” Bilton said. “They kept as much funding as they could in the bank while hearing the voices of their employees.”

According to the survey, nearly half of the respondents haven’t needed to approach their financial institutions to discuss extending credit lines or seek interest relief.

“There’s a resiliency in the sector,” Bilton said. “I think that there wasn’t a need to approach the banks for help, it’s a real positive sign.”

Bilton conceded that he had wondered how companies were going to survive long enough until government support programs kicked in.

Cash flow issues have been eased a bit with the first cheques from the federal government’s emergency wage subsidy program landing in bank accounts Thursday.

“Four or five weeks ago, I was having a lot of discussions with very anxious chief financial officers,” Bilton said.

“They’re not nearly as anxious now. They’ve survived that gap period (from original equipment manufacturers shutting down to government programs starting).

“OEMS and purchasing groups are deploying funds, another quarter has arrived in terms of invoices and we’re preparing for the automakers to restart.”

Bilton said what’s also encouraging is suppliers are largely getting paid on a schedule of normal terms, thanks in part to government supports.

“Companies need to use this time to have a 30-day restart plan,” Bilton said.

“They should be transparent with their suppliers and customers. They need to plan for the health and safety of their employees and they must make sure they have the resources and finances to sustain themselves for the next two or three months.”

Bilton said companies expect consumer demand to be depressed for six to nine months. However, he said it’s the period following that concerns local shops more.

“A lot of what we’re working on in tool and mould making has been in the pipeline for a while and should get us through the summer OK,” Bilton said. “The hope is by the time we get into fall, with new products arriving, things will pick up again.”