U.S. auto bankruptcies could deepen Mexican downturn

MEXICO CITY (Reuters) - Any bankruptcies among U.S. automakers could further batter Mexico's auto industry, push some parts suppliers to the breaking point and spur tens of thousands of layoffs.
Fears are mounting that General Motors Corp and Chrysler LLC could be lurching toward bankruptcy. On Tuesday, a source close to GM said the company is in "intense" preparation for a possible bankruptcy filing.
A Chapter 11 filing by either automaker could upset Mexican assembly lines and disrupt the flow of cash to auto parts makers, possibly spurring bankruptcies among the smallest or those already facing liquidity problems, analysts say.
"It could set off a domino effect throughout the whole (car parts) industry," said Armando Soto, head of Mexican auto industry consultancy Kaso y Asociados.
Mexican subsidiaries of U.S. automakers are unlikely to close their Mexico plants, as cheaper labor costs there make the factories essential to restructuring and cost-cutting plans.
But hundreds of parts makers who are primarily suppliers to U.S. firms -- either in their Mexican or U.S. factories -- stand to be hit hard by U.S. auto sector woes.
Companies that are major suppliers to U.S. firms and are owed large amounts of money could be pushed to breaking point by a bankruptcy process, said Agustin Rios, head of Mexico's auto parts industry association, or INA.
"If they can't deal with the financial weight, they will go bankrupt and that is going to affect the other automakers they supply," Rios said.