Automotive Suppliers in Crisis

How Banks Actively Manage Risks and Protect Their Assets

The situation in the automotive supply sector has changed fundamentally. Many banks are seeing in their portfolios that economic tensions are building up more quickly and escalating into critical situations much sooner than in the past. Declining margins, increasing pressure to invest, and volatile call-off volumes mean that even established suppliers can face short-term liquidity bottlenecks.

At the same time, the crisis is rarely one-dimensional. In practice, economic difficulties are almost always the result of several factors acting in parallel: structural margin pressure, operational instability, and increasing capital tied up. For banks, this means that traditional early-warning systems alone are no longer sufficient. What is crucial is a deep understanding of the industry and its specific mechanisms.

Why the Automotive Industry Is Different

Understanding Complexity, Capital Commitment, and Operational Reality

Automotive suppliers differ fundamentally from many other industries. Long development cycles, high upfront costs, and close dependencies on OEMs mean that economic risks often become apparent only after a delay. At the same time, production networks are highly complex and offer only limited flexibility.

This complexity becomes particularly evident in restructuring situations. Problems often arise not only in the income statement but also in operational processes. Delayed start-ups, inefficient plants, or unstable supply chains lead to additional costs that have a direct impact on earnings and liquidity. Without an understanding of these interrelationships, risks can hardly be assessed validly.

Why traditional analyses often fall short

As soon as the first signs of strain appear, the need for reliable decision-making foundations increases. Many plans are overly optimistic at this stage; operational risks are underestimated, or the timing of certain effects is misjudged. For banks, this creates a valuation problem that can manifest itself in an increase in monitoring trigger events, rating downgrades, declining profitability, and forbearance measures.

An Independent Business Review provides the necessary transparency here. It examines the economic situation, assesses the plausibility of the planning, and identifies the key value drivers. What matters here is not the analysis itself, but determining whether the company can be stabilized under realistic assumptions. This distinction is particularly essential in the automotive sector, as operational issues often have the greatest impact.

IDW S6 as a basis for decision-making

Combining Legal Certainty and Economic Viability

When structural measures become necessary, a restructuring plan in accordance with IDW S6 serves as the central reference point. For banks, it provides a solid foundation for far-reaching decisions, as it covers both economic and legal aspects.

A viable plan goes far beyond financial planning. It combines root cause analysis, concrete measures, and integrated business planning. Only when these elements work together consistently does a realistic prospect for continued operations emerge. Particularly in the supplier sector, it is evident that the quality of such a plan depends significantly on its operational foundation.

Operational Levers in the Supplier Sector: Where Restructuring Actually Creates Value

In the automotive sector, the decisive factors rarely stem purely from financing. They lie in the operational structure of the companies. Production problems, inefficient plant structures, or poorly managed supply chains are often the root causes of financial difficulties.

In our experience, start-up management, production performance, and supply chain stability are key levers. At the same time, working capital plays a decisive role. High inventory levels and long receivables cycles tie up significant liquidity that is lacking in critical situations. Targeted management can provide tangible relief in the short term.

In addition to analysis, implementation is crucial. To complement financial restructuring, we work with experienced consultants who have many years of industry experience and embed measures directly into production, the supply chain, and the organization. This ensures that identified levers are not only planned but actually implemented and sustainably reflected in earnings and cash flow.

Financial Management as the Key to Liquidity and Transparency

Precise financial management is essential alongside operational improvements. In restructuring situations, liquidity becomes the key management parameter. Without a clear view of cash flows and financing needs, measures cannot be effectively prioritized.

Integrated planning links earnings, the balance sheet, and cash flow, creating the necessary transparency. Complemented by rolling liquidity planning, this results in a management tool that highlights both short-term risks and medium-term developments. For banks, this transparency is the foundation for making well-informed and transparent decisions.

Automotive expertise meets restructuring expertise

Horn & Company has many years of experience in restructuring automotive suppliers. We are familiar with the specific challenges of the industry and understand how operational problems are reflected in financial metrics.

By combining financial management with operational implementation, we have consistently achieved a significant stabilization of earnings, a substantial reduction in working capital requirements, and the securing of financing in our projects. The key to success is not the isolated implementation of individual measures, but rather an integrated approach that consistently translates operational improvements into P&L and cash flow effects, thereby laying the foundation for sustainable business continuity.

From a problem case to a stable credit exposure

The restructuring of automotive suppliers presents banks with complex challenges. Standard approaches often fall short because they do not sufficiently account for industry-specific dynamics.

What is crucial is an integrated approach that combines financial transparency, operational effectiveness, and strategic perspective. Only in this way can value be preserved and the foundation for sustainable stabilization be laid.

If you would like to discuss current developments in your portfolio or assess a specific situation, we are always available to talk.