Big Three failure could implode U.S. supply base

DETROIT (Reuters) - The failure of a U.S. car company would quickly cause failures in the domestic auto parts supply base, a Johnson Controls executive said on Thursday in testimony supporting a government rescue for the three U.S.-based automakers.

"Should one of the Detroit Three fail, a significant number of supplier failures would occur and would become unmanageable," said Keith Wandell, president and chief operating officer of JCI, a global auto parts supplier.

Wandell testified along with General Motors, Ford Motor and Chrysler executives before the U.S. Senate Banking Committee in support of government aid for those automakers.

Supply chain managers at the top car companies spend "an inordinate amount of time" managing distressed suppliers as does JCI, Wandell told senators, adding that major changes are needed in the industry and the supply chain.

"But we hope everyone here understands how important it is that these changes occur in an orderly fashion, which is unlikely if we allow even one of these companies to fail. There will be an implosion of the supply base that will affect all of the car companies," Wandell said.

Foreign automakers that have U.S. assembly plants may not be at the Senate today, but are also "deeply concerned" about the viability of the U.S. auto parts supply base, he said.

JCI, which also produces building and heating controls and lead acid batteries for cars and advanced batteries for hybrid vehicles, would weather the storm of an automaker failure because of the strength of its nonautomotive businesses, he said.

JCI is the third biggest auto parts maker in North America, supplying parts directly to the U.S.-based companies seeking government aid and various foreign automakers.

Wandell said more than 35 percent of JCI's suppliers are financially distressed and on the verge of bankruptcy, up from about 20 percent a year ago. It is a supply base that employs more than 100,000 workers, he said.

(Reporting by David Bailey)