Tied up in Excess Working Capital, Hackett-REL Research Shows
Hard-pressed companies face even greater liquidity pressure in 2006
ATLANTA, April 11, 2006 – In the face of bankruptcy filings, lagging sales and rising raw-material prices, the 20 largest US automotive suppliers are nevertheless ignoring up to $7.6 billion in cash opportunity, according to new research from Hackett-REL, part of The Hackett Group Answerthink, Inc. (NASDAQ: ANSR). The opportunity comes in the form of excess working capital tied up in invoices paid late by customers, suppliers being paid too early and inventory lying unsold on warehouse shelves.
Results of the Hackett-REL benchmark study and comparative analysis, “Fine- Tuning for Optimum Cash and Cost Performance,” also determined that the top 17 European automotive suppliers are similarly overlooking up to $9 billion in cash, which is frozen in excess working capital. On average, US auto suppliers significantly outperform their European counterparts, showing 37% lower net working capital ratios. But some of this gap, and the strong working capital performance by several US auto suppliers that are already in or near bankruptcy, is likely to have been driven by special assistance programs from US automakers, and may disappear in 2006.