German auto parts company declares bankruptcy
When the auto industry is caught between the financial squeeze of banks and credit insurers, smaller auto parts companies are the first to go.
FRANKFURT -- TMD Friction is the first German auto parts company that declared bankruptcy on Monday, saying it was the result of slumping orders and restricted credit.
"I regret that we were unable to reach an agreement with our shareholders and our creditors," TMD Friction boss Derek Whitworth said in a statement.
He added that the company had been "hit severely by the fall in the automobile industry and the withdrawal of credit insurers."
TMD Friction, which makes brakes and has established its headquarters in Luxembourg, filed for bankruptcy for four units that employ roughly 2,000 workers based in the north-western German state of North Rhine-Westphalia.
In 2007, TMD Friction employed 4,500 workers in 11 countries.
Auto parts companies have been hit by the financial crisis because banks are tightening credit conditions, while credit insurers that guarantee transactions have been accused of raising prices sharply or cancelling contracts with little prior notice.
Automobile sub contractors, which employ 330,000 people in Germany, have also been struck by a fall in orders from the export oriented auto industry, which is suffering from a drop in demand forcing car makers to announce production cutbacks.
Some experts say failures and large scale layoffs could claim up to 50,000 jobs.
"The dangers from a credit squeeze exist for many small and medium sized enterprises", the head of the Schaeffler Group, Juergen Geissinger, said Monday in the magazine Automobilwoche.
For others however, an expected consolidation of the auto parts sector could work to the advantage of German companies.