Major parts supplier bankruptcy

Auto parts supplier First Brands group declared bankruptcy. I didn’t know who they are/were. Turns out they own/make lots of parts lines:

“First Brands Group produced OE aftermarket parts for many of the well-known brands you see on your local auto parts store shelves. Needed a filter? You probably bought one from Fram. Needed brakes? You were probably grabbing Centric Parts, Raybestos, or Cardone parts. Wipers? Those were most likely an Anco-, Michelin-, or Trico- branded blade. Spark plugs? That might have been an Autolite-branded plug or wire set you bought recently. Needed hitch or receiver parts for your trailer? The best-known brand and what you’d normally find easily was Draw-Tite or Reese. Well, First Brands Group either produced those parts for its own brand or licensed the name and produced parts under those other brands.”

Which bankruptcy chapter? 13 means to me that they still think that with protection from creditors, they can reorganize and continue operations. Chapter 7? Fuggedaboudit.

Chapter 11. More info here:

First Brands files for bankruptcy, revealing billions of dollars in liabilities

Their asset to debt ratio is ridiculously low, between 20% and 2% according to the article. How could they still obtain loans to get to that position?

I guess I should have known someone out there was buying up all the little producers. Then a little glitch and the cards fall. Who are these people? Bankers, private equity? Debt between 10 and 50 billion? Quite a range to no5 know for sure.

I saw an article a few days ago…but after 10 paragraphs without the article mentioning who the company was I stopped reading.

What difference does this make to the auto parts purchaser? Someone else will make all this stuff unless no one wants to buy it.

Supply interruptions are never a good thing, fewer makers = less competition=higher prices, if only temporarily.

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Possibly at a higher price. We went through this years ago with circuit boards. Companies started closing or consolidating. And with less competition (or none in some cases) the cost of some circuit boards skyrocketed. With one vender we used, all their competition went out of business and they were the only game in town. When it came time to renew our contract their prices were TRIPPLE what it was just 5 years ago. We had no choice but to pay it. It took over 3 years to find a replacement part company with reasonable prices.

Very true and especially in the case of consumables.

Auto parts today are typically outsourced to volume manufacturers in Mexico, China, etc., and sold under a variety brand names so it will be simple for the actual manufacturer to simply relabel the existing product.

For example, Mobile 1 and Purolator oil filters are actually made by Mann so if Mobil or Purolator decide to exit the filter business we’ll probably be able to buy the exact same filter but under a different brand name.

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While parts can be made anywhere, tariffs on imported parts and the loss of domestic production will increase cost pressure even more.

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I don’t particularly worry about price increases on things like oil filters. Even a 50% increase is negligible dollar wise. I am concerned that the smaller shops and suppliers are able to withstand the storm. Usually or at least many times when private equity starts buying up businesses, they suck the assets out and just leave the bones in the dust. Makes it Impossible to survive the storm.

Yes. I meant to distinguish the case of something disappearing entirely from a commodity whose supply base is shrinking. I’m for competition, am with Louis Brandeis on the problem of bigness, wish we had enforced anti-trust laws more vigorously. But I doubt the bankruptcy of First Brands will make much difference - perhaps you can enlighten me: how many are the competitors?

Which may mean they were selling at too low a price. Niagara Cycles tried to make a big play in bicycle parts, sold everything cheaper than everyone else. No one in the bicycling community was surprised to see them go out of business - disappointed, but not surprised.

That’s a choice.

Tariffs on imported parts are not a choice for me. Citizens don’t get to choose.

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Ramdom , tell us how we can choose to have or not have Tariffs.

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Not it doesn’t. It means they are now making more profit on the same item. Without competition you can set the price.

I remember the days when they broke up ma bell. Some people were worried but it fueled great competition. We ended up shaving a million in phone bills.

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We made a choice last election. He promised tariffs; we voted for him. I suspect that if enough people make a stink he’ll roll them back. Tariffs are popular: Senator Sanders (Vermont) called for tariffs. The consequences of some decisions last for years.

You can say it doesn’t, and you may be right. I wrote ‘may’. I see an article in today’s newspapers about the discount airlines’ tough times.

Maybe.

Was there only 1 other company in the auto parts business? I don’t know.

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For common repair parts like filters and brake pads, there is a lot of competition.

Front brake pads for your 1987 Toyota for example, Rock Auto lists 12 different brands. Those include Raybestos and Centric.

If you had a 1980 Chrysler New Yorker, there are 7 different brands of front brake pads.

Brands do not correlate 1:1 with manufacturers. Brands mean nothing. How many companies are in the business of manufacturing the parts are what matters. Often there is only a few manufacturers making numerous branded products…