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Jan 10th, 2008                                Print this article

An ugly word--bankruptcy--could be heard more often in 2008

By Clare Goldsberry

That, anyway, is according to a new report predicting corporate bankruptcies in the U.S. are expected to increase 13% in 2008, after rising an estimated 40% in 2007. “In general, the ‘goods’ sectors will see their risk profiles deteriorate more rapidly than services, excluding the financial sector,” say the authors of Global Insight’s World Industry Service Sector Risk Ratings forecast, Mark Killion and Natasha Muravytska. “The bright spot for some manufacturers is the outlook for exports, as a weaker U.S. dollar and still-strong growth in the rest of the world will mitigate some of the damage from worsening domestic prospects.”

Industries such as electrical appliances, communication equipment, recreational and cultural services, and retail trade will see worsening risk profiles as consumer spending is expected to slow. In addition, manufacturers of electrical and electronics products, which are net importers of parts, will face additional pressures due to the deterioration of terms of trade, assuming the U.S. dollar does not gain in strength, the report noted.

Jeff Mengel, partner with management consultancy Plante & Moran LLC, told MPW that he expects some significant casualties among plastics processors. “With the rise in resin prices, regardless of whether or not molders have the ability to pass these increases along, it creates an excuse for OEMs to review their contracts with molders. Companies that are not very competitive and relying solely on the fact that they’re just fulfilling a current need are at more risk as that need gets redefined as prices for resins go up,” said Mengel. “Before, it was a convenience purchase, now it will be an expense. There’s a lot of capacity and availability in molding and several industries are shifting their suppliers. In the appliance industry almost everything got re-sourced last year. The automotive industry does it regularly as a matter of habit. Anything with volume associated with it has the potential of being at risk for re-sourcing.”—cgoldsberry@modplas.com

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