Parts shortages and higher commodity prices are putting a financial squeeze on Tier 2 and Tier 3 suppliers, in some cases forcing them to go to their Tier 1 customers to renegotiate pricing or ask for a cash infusion.
The third option: Go bankrupt.
Pat D'Eramo, CEO of Canadian Tier 1 supplier Martinrea International, has had a number of lower-tier suppliers ask his company to renegotiate their contracts, he says.
That maneuver, occurring around the industry, is putting even more financial pressure on Tier 1 companies as they deal with pricing pressures of their own, he said.
"We negotiate and we're paying the difference," D'Eramo said. "Most of the supply base is doing the same thing. We're trying to work with our customers to make adjustments that are in line with the adjustments that we make with Tier 2s. That's the fair way to do it."
D'Eramo told an audience at an industry conference this month that s…