This article was originally published in Automotive News by John Irwin.
September 15, 2025 | LINK
One-fifth of suppliers topple into financial distress as pessimism grows
At least 20 percent of automotive suppliers are in financial distress and their leaders are more pessimistic about business conditions than they have been in years, two recent studies show.
An analysis of the automotive supply chain by financial analytics firm RapidRatings found that about 1 in 5 automotive suppliers were already in financial distress before the impact of tariffs began to be felt. It also found that tariffs as they stand could lead to a 23 percent increase in the number of distressed suppliers.
The past five years were extraordinarily difficult for the supply base, RapidRatings CEO Charlie Minutella said.
COVID factory shutdowns in 2020 followed by inflation, supply constraints and higher interest rates have strained many suppliers’ finances, he said.
“It’s kind of been one thing after another with these companies, and they’ve been struggling to find normal,” Minutella said. “And we’re not seeing it get better anytime soon.”
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RapidRatings CEO Charlie Minutella spoke with Automotive News about the latest crisis hitting the auto industry: small suppliers are facing financial distress as tariffs and capital costs are taking effect.
As automakers pivot toward domestic production, the financial health of smaller suppliers has become a critical vulnerability that could derail these efforts.
RapidRatings' latest analysis reveals troubling trends that many companies are missing:
- Private suppliers are 27% more likely to face financial distress than their publicly traded counterparts, yet due to the nature of their financial reporting, they’re harder to spot and manage before problems emerge
- Tariffs alone will drive overall supplier distress up 23%, with some manufacturing sectors seeing failure rates spike into double digits
- Four critical sectors are in the crosshairs: Primary Metal Manufacturing (distress rates jumping from 25% to 35%), Plastics & Rubber Products Manufacturing (25% to 39%), Transportation Equipment Manufacturing (22% to 33%), and Merchant Wholesalers, Durable Goods (18% to 37%)
When suppliers enter financial distress, the warning signs ripple through the supply chain long before bankruptcy hits. Cash-strapped suppliers cut corners on infrastructure investments, leading to production delays, quality defects, and unexpected outages that can shut down entire assembly lines.
Early warning systems are critical. Companies need continuous financial health monitoring systems that can spot trouble before it becomes crisis.
“The supply chain is under a ton of stress,” RapidRatings CEO Charlie Minutella said. “Our recommendation is that automakers and suppliers get much tighter in terms of how they assess and manage their supply chains moving forward.”
See the risk in your supply chain today.
