Vehicle parts suppliers in ‘survival mode'

Roger Pitot, executive director of the National Association of Automotive Component and Allied Manufacturers, said up to 30 firms were working three-day weeks, a sign that these companies were in survival mode.

If volumes did not pick up soon, Pitot said, these companies' futures would be in jeopardy.

But relief might be in sight. The government may soon announce measures aimed at rescuing the automotive industry following a meeting yesterday between the Department of Trade and Industry, automotive representatives and unions. These measures are believed to include short-term loans.

Nimrod Zalk, the department's deputy director-general for industrial development, said the department would provide clarity on what was discussed within the “a couple of days”.

Theo Loock, CEO of Metair, the listed automotive component producer, said some component suppliers were experiencing working capital difficulties and their profit margins were under pressure.

Component manufacturers are experiencing a cash-flow and liquidity crisis because vehicle makers have slashed orders for parts and components. Some component manufacturers are now seeking bridging loans to avoid bankruptcy.

Moroasereme Ntsoane, head of metals at the Industrial Development Corporation (IDC), said the development finance institution had received quite a number of applications from automotive components manufacturers for financial assistance.

Ntsoane said there were a few companies whose applications did not meet the IDC's minimum requirements for accessing funding.

Loock said Metair did not require government financial aid, noting that the company kept a strong relationship with its commercial bank.

He said the company concentrated on managing the business for cash. Cash would be used to support the business once the cycle turned, Loock said, adding that Metair was not actively looking for acquisitions.

Pitot said he was aware of two acquisition deals in the pipeline.

Johann Strydom, sales and marketing manager at Bosal Afrika, a component supplier, concurred and said established companies were looking to acquire smaller rivals at below market value.

Source: Business Day

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