Supply chains are only as strong as their weakest link. This is traditional wisdom offered up by the most seasoned supply chain professionals, but how can you identify who the weak link is in your supply chain?
Take Luminar Technologies, an automotive technology supplier, as an example. It was recently reported that Luminar is on the verge of bankruptcy, a distressing situation if you’re a large automaker reliant on the supplier. To some, this downturn may seem sudden.
But for those who were watching closely, Luminar’s imminent bankruptcy isn’t sudden at all.
Automakers who were following Luminar’s financial health trends saw the signs – even before COVID.
FHR
Today, Luminar is rated High Risk with a 27 out of 100 rating on our financial health scale, what we call the FHR. But, that said, they were Low Risk in 2019 before the pandemic. They fell to the bottom of Medium Risk in 2020 during the pandemic and never recovered. They’ve been firmly entrenched in the bankruptcy danger zone since 2021.
To put this in perspective, over 92% of companies that eventually file for bankruptcy have an FHR below 40. A look into Luminar’s financial trajectory mirrors this historical trend all too closely.
While the FHR is an indicator for default risk, it also measures the firm’s efficiency, competitiveness, and operational resilience. Companies with poor financial health often struggle to maintain quality, meet delivery timelines, or invest in cybersecurity and equipment maintenance. In short, they become unreliable.
Our studies have shown that companies with weak financial health are 2.0x more likely to have issues with quality and 2.6x more likely to have issues with delivery. Both of which can lead to costly disruptions to their customers’ operations.
For industries that rely on just-in-time manufacturing and have razor-thin margins for error, a supplier like Luminar represents a critical vulnerability.
How Did We Get Here?
Our Financial Dialogue report highlight the key reasons for Luminar’s weak and deteriorating financial health.
- In 2021, Luminar took on over $600 million in new debt, resulting in a Debt to Asset ratio of 69%. While their debt levels have dropped to $429 million as of their September 30, 2025 financials, their Debt to Asset ratio as risen to 211% as the sold off assets to help raise cash.
- With negative profits and cash from operations, Luminar is not able to cover the interest expense on their debt.
- Since the end of 2023, Luminar has burned through over $85 million in cash, reducing their Cash Ratio from 166% to 87% at the end of Q3 2025. While their Cash Ratio “appears strong” at 87%, that is primarily due to a low level of Current Liabilities.
What Risk Managers Should Be Doing
Luminar serves as a cautionary tale for every supply chain risk manager: reactive monitoring isn't enough. You need proactive, data-driven insights into your critical suppliers before disruption strikes.
Supply chain risk professionals should consider the following:
- Spend Concentration - For automakers and others who partnered heavily with Luminar, the question is, how much of your operation depended on a financially unstable supplier? In the future, where dollars are devoted is where risk assessment should be most in-depth and sophisticated.
- Looking Beyond Surface-Level Metrics - Traditional risk indicators like trade payment data often lag behind or miss the warning signs entirely. These methods may have flagged Luminar's troubles too late, if at all.
- Focusing on Financial Fundamentals - RapidRatings focuses on what matters most: comprehensive financial statement analysis. This approach enabled us to identify Luminar's decline early and accurately, giving clients the lead time they needed to act.
When others miss the signs, we won't. Because when it comes to risk, financial health is the first and most reliable line of defense.
Don't wait for the headlines to learn your supplier is in crisis. The data is there. Are you watching?
