SupplierWatch: Which 7.317 billion USD Automotive Giant Might Be In Trouble?

According to CreditRiskMonitor’s FRISK^® score – which has a 96 percent accuracy rate, Southfield Michigan-based Federal-Mogul could be in big trouble. The FRISK^® score indicates a company’s level of financial stress based on the probability of a bankruptcy over a one year period. Its clients rely on this information so they can protect themselves against future problems.

The company, which is an American developer, manufacturer, and supplier of products for automotive, commercial, aerospace, marine, rail and off-road vehicles, employing 53,000 has a FRISK^® score of 3. What this means is that there is a 2.10-4% probability that Federal-Mogul “will be in bankruptcy in the next 12 months.”

While my interpretation of the 2.10-4% probability risk seems low, CreditRiskMonitor’s President Bill Danner said that this score “should definitely raise a red flag,” and encourages supply chain professionals who are working with the company to “start a candid conversation about their financial health.”

This company was merged into or acquired by Icahn Enterprises LP on January 23rd, 2017. Icahn is a private company so it may be difficult to get financial information moving forward.

Given the above information, and in the spirit of fair and unbiased reporting, on Friday I contacted Federal-Mogul to get their reaction to the score before publishing this post. I was directed to Karen Shulhan who is in corporate communications. I have not yet heard back from Ms. Shulhan.

Another automotive industry company on the recent CreditRiskMonitor’s Commercial Credit Report with a FRISK^® score of 3 is Lisle, Illinois-based Navistar International Corporation.

Formerly known as International Harvester, Navistar has 12,400 employees with 2016 revenues of 8.111 billion USD.

As I try and comprehend the sheer volume of the revenue and jobs associated with these industry heavyweights, it is hard for me to imagine that bankruptcy is even a possibility. Perhaps my lack of comprehension is in part due to a “too big to fail” mindset. Of course, if you told me that Sears would be going the way of the dodo bird five or ten years ago, I would not have seen that coming. In fact, I still can’t get over the fact that Eaton’s – a once great Canadian icon closed its doors in 1999 putting approximately 70,000 out of work.

Not Just The Automotive Industry

Based on a preliminary review of the latest CreditRiskMonitor Commercial Credit Report, there are some significant hitters in the Apparel, Transport and Aerospace/Defense industries that have similar if not worse scores.

What this tells me is that with suppliers the only certainty is uncertainty. As a result, I am still left wondering why only 20 percent of companies screen their suppliers?

Do you have an answer?

To learn more about the FRISK^® score click on the CreditRiskMonitor icon below.

 

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