The Trickle-Down Effect
An Auto-Parts Maker Fades in the Fallout From Detroit
Wednesday, July 15, 2009
JACKSON, Mich. -- When business was at its best, auto-parts supplier Bill Miller had 225 employees. Now he's got three, and two of them are breaking down hulking parts-making machines to sell as scrap metal.
Miller has got work lined up -- an order for 7,000 parts from General Motors -- but he's so deeply in debt that he can't pay for the raw materials or the workers he needs to fire up his production line and start making parts at his plant, which sits 70 miles west of Detroit. While some of America's biggest companies are getting a bailout from Washington, Miller has been rejected by two banks for a loan that could keep his business afloat and keep jobs in this town of 34,000.
"They don't want to help small businesses," Miller said of the banks. "But I gotta get some iron castings in here so I can get my orders going and get some cash flow in. It's going to be hand-to-mouth."
Miller is emblematic, industry trade groups say, of the struggles facing the 5,000 auto-parts suppliers across the country as they struggle to survive in the aftermath of the massive downturn in the auto industry and the GM and Chrysler bankruptcies. Analysts predict that 600 suppliers could go under over the next two years.
For four decades, Miller's company, Miller Industrial Products, has been churning out brake rotors, hubs, drums and pads for the auto industry. He thought he might get a break recently when GM ordered about $250,000 worth of new parts and the automaker sent word that it would pay him $150,000 for work already rendered.
But then the reality of the lending market settled in. Miller, who is best known as "Billy" to friends and locals, went to Citizens Bank, where his uncle and cousin once served on the board of directors. The bank rebuffed his request for a $35,000 loan.
He called another local bank for the same amount, but was told that with his debts, he is pretty much "unbankable." He owes $5,000 to a company that sells cutting tools, another $5,000 to a steel company, and $6,000 to a guy who paints the parts. And he is three months behind on the $8,300-a-month mortgage on his plant.
Sure, the money coming in looked promising. But as one banker said, "It's like getting a bite of steak when you haven't eaten in three weeks."
"It's good, but it's not going to go very far," said John Waldron, the vice president who handles commercial lending at County National in Jackson. "You're still starving."
Instead, Miller on Monday took out a $20,000 line of credit on a personal credit card. Using that and a small payment from GM, he paid two foundries $28,000 he owed. But he said one foundry is demanding prepayment for any future materials.
Things, of course, weren't always this way.
Miller's father -- the son of a German immigrant who once repaired wooden wheels for buggies -- began making auto parts in the late 1960s. Miller started working for his father at the age of 10, sweeping floors and picking up scraps. A clean-cut teenager with brown hair, Miller spent evenings rebuilding a red 1931 Model-A Ford. He graduated from a local Catholic high school and studied engineering at a community college before joining the Air Force. After a stint in the service, including time in Vietnam, he came home to work at the plant.