After The Great Recession in 2008, companies and governments across the globe were forced to reckon with critical system breakdowns that led to widespread bankruptcies, foreclosures and job loss. Unfortunately, it seems that not everyone learned the lessons of the global economic failures.
This week in the news, the financial collapses of a major parts supplier and a subprime auto lender are revealing critical fault lines in the automotive supply chain. Global supplier First Brands Group filed for bankruptcy after a period of “severe distress,” reports Financial Content. The company “marked a swift and alarming deterioration of its financial health” when it revealed it held more than $10 billion in liabilities.
Simultaneously, Tricolor Holdings, a subprime auto lender, declared bankruptcy after double-pledging collateral — essentially “using the same loan portfolios to secure multiple lines of credit with different banks without their mutual knowledge,” the article explains. This unethical practice leaves all parties exposed, underscores significant systemic vulnerability and recalls the flawed governance practices that precipitated the 2008 crisis.
Financial institutions imperiled by Tricolor's fraudulent and deceptive activities include Barclays Plc, Fifth Third Bancorp and JPMorgan Chase. “Investors and analysts are now assessing the fallout for the individual firms exposed as well as for the broader market,” Reuters reports. Furthermore, credit standards are expected to tighten across the industry, resulting in higher borrowing costs for consumers and a potential contraction in used car sales.
Meanwhile, a recent fire at a Novelis aluminum plant in Oswego, New York, could create more automotive supply shocks and escalate prices for specific materials. Ford is already cutting production in response, per the The Wall Street Journal, moving up downtime that was previously planned for later in the year. These disruptions follow other financial issues for the company: “Ford is already facing $2 billion in costs related to President Trump’s tariff policies and $5 billion in losses by its electric-vehicle unit this year,” Reuters states.
To compensate, “automakers and Tier 1 suppliers will likely accelerate efforts to diversify their supply chains,” Financial Content predicts, reducing reliance on single-source components and exploring “increased vertical integration to gain greater control over critical materials and parts.”
Collaboration in times of crisis
Prioritizing transparency and ethical business practices are central focuses of ASCM’s new documentary series, The Chain, which investigates how networks can be improved to better handle both current and future pressures. In automotive, one of the most significant of these is the electric vehicle revolution. As supply chain expert Dr. Doug Thomas notes in the “Transport” episode, demand for EVs is growing rapidly and will continue to do so, requiring automotive companies to pivot resource allocation toward high-volume production while investing in workforce training to effectively manage advanced electric architectures.
Indeed, people are every company’s most valuable assets. With ASCM’s Supplier Relationship Management Certificate, your teams can develop the knowledge to transform supplier relationships into true competitive advantages by evaluating key benefits and risks, enhancing organizational efficiency, and advancing performance throughout the supply chain. And for more essential insights, be sure to watch "Transport" — and all six episodes of our exciting documentary series. Check them out on Prime Video today!
