More Automakers Likely to Seek Bankruptcy in Next Five Years

Companies are using bankruptcy more creatively to dissolve their old obligations and. though they can shed pensions and health-care plans while under court protection, they may not survive as viable companies without radically different business plans.

Published: 05-Jan-2007

Automakers and their suppliers are likely to declare bankruptcy at a faster rate in the next five years, according to a majority of global auto executives surveyed for a study released today.

"Companies are using bankruptcy more creatively to dissolve their old obligations," said Daron Gifford, head of the Detroit- based automotive practice at KPMG LLP, which issued the study. Though they can shed pensions and health-care plans while under court protection, they may not survive as viable companies without radically different business plans, he said.

About 56 percent of the auto executives said there will be more bankruptcies in the next five years, and 47 percent cited excessive costs as the main reason. The October 2005 bankruptcy of Delphi Corp., the largest U.S. auto supplier, helped cut the stigma of court protection, said Betsy Meter, a KPMG partner.

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