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'Great Recession' strains the chain: dubbed the "Great Recession," the nation's economic problems are taking a toll on metal and parts suppliers throughout the automotive supply chain, not just on the Detroit Three.

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THE CRIPPLING EFFECT of the recession on the Detroit Three automakers is well known. Less visible is the struggle facing other players in the automotive supply chain, from Tier 1 and 2 parts manufacturers to the mills and service centers that supply them with steel, aluminum and copper products.

Some experts expect the auto market to hit bottom late this year and then start a painfully slow climb, one that could be made far steeper by bankruptcies among key parts suppliers.

The auto supply chain's problems began in late 2007 when vehicle production started to decline at the same time that commodity prices were increasing, says Doug Harvey, automotive partner at A.T. Kearney in Chicago. "Then in the third quarter of 2008, the financial crisis hit and the bottom fell out of the auto market, creating a very distressed sector."

Mark Cornelius, president of Morgan & Co., West Olive, Mich., predicts that North American car and light truck production will fall to 8.57 million units this year. That would be a 32.2 percent drop from the 12.63 million light vehicles produced in 2008, and only slightly more than half of the 16 million produced in 2007.

Likewise, U.S. auto sales continue to decline. While monthly light vehicle sales had been running at an annualized rate of 9.9 million, February sales dipped to a 9.1 million annualized rate. Cornelius expects sales to total 9.8 million in 2009, a 25.6 percent decline from the 13.17 million sold in 2008.

These are levels the North American automotive industry has not seen in over 15 years, says Ronald E Krupitzer, vice president of automotive applications for the American Iron & Steel Institute in Washington, D.C.

"We are in what could be called the Great Recession, especially in Detroit," adds George Magliano, director of automotive research for IHS Global Insight in New York.

"This is a big mess," agrees Joe Druzak, president and chief executive officer of Kreher Steel Co. LLC, Melrose Park, Ill. "We are scrapping almost 13 million units a year while producing only about nine million vehicles. You can't do that without impacting the whole supply chain. And I don't see anything spurring U.S. auto sales in the short term. We are likely to have extremely bad...

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