This is the first installment of a Ward’s 7-part series stemming from interviews with the purchasing departments of GM, Ford, Chrysler, Toyota, Honda and Nissan.

Between exorbitant raw-material price increases, falling vehicle volumes for certain auto makers, a weak dollar and the rapid – albeit predictable – shift from large vehicles to smaller ones, these are the dog days for the automotive parts business in the U.S.

Delphi Corp., once the king of the supplier world in stature, scope and sales, remains unable to emerge from nearly three years in bankruptcy due to the tight credit market, and it is gradually being dismantled into much smaller pieces.

American Axle & Mfg. Inc. survived a debilitating 81-day strike by the United Auto Workers union only to learn it will ship far fewer axle sets to its largest customer, General Motors Corp., because the auto maker is shutting down four pickup and SUV plants.

American Axle can no longer claim to be one of the few consistently profitable suppliers in the U.S.

Even billionaire investor Wilbur Ross Jr., who sees opportunities where most industry watchers see trouble, sees the breaking point on the horizon, saying weak suppliers will not be able to stay in business much longer.

“At some point, everyone in the supply chain will have to make a difficult decision to stop supporting the weaker suppliers in order to concentrate assistance on core long-term suppliers,” Ross says in a keynote speech at the recent Ward’s Auto Interiors Show in Detroit.

“Most of our suppliers would no longer exist unless we let them raise prices,” Ross says.

So it’s no wonder a question to North American OEM purchasing chiefs about the financial health of their suppliers goes over like a cell phone ringing in church.

John Miller, vice president-purchasing for Nissan North America Inc., says suppliers in general are doing worse than they were two years ago, when bankruptcy was gripping an alarming number of North America’s largest suppliers.

“Some are doing better than two years ago, because they have more flexibility than others,” Miller says. “But the ones that are more truck-focused and highly dependent on raw materials are doing worse.”

Any supplier relying heavily on light trucks to pay the bills desperately needs to devise a new business model.

“I think as we look forward, our concern is how the more truck-centric suppliers will fare,” Miller says. “That’s the trend we’re all seeing.”

Three years ago, the auto maker’s North American arm created the Nissan Supplier Revival Group to assist distressed parts makers. Miller credits the cross-functional group of Nissan staffers from purchasing, supply-chain management and finance with doing an “excellent job … working with the supply base on these issues.”

The NSRG team monitors supplier trends. “We have financial models that let us rate each of the suppliers,” Miller says. “The main thing we’re doing is having frequent communication and awareness about how the supplier is doing.”

Whereas three years ago the bankruptcies centered on large suppliers, today it’s the smaller suppliers – and more of them – that are hurting. “There’s more suppliers in distress,” Miller says.

The shift in U.S. vehicle sales from trucks to cars will take its toll on certain suppliers. For instance, GM has about 100 suppliers – out of 1,700 in North America – that produce parts exclusively for trucks and SUVs.

“You may be a 100% truck supplier to GM, but we may be only 4% of their turnover,” says Bo Andersson, GM’s group vice president-global purchasing and supply chain. “If so, then I have no concern. But if you have all your eggs in the truck basket with us, and you have a lot of business with us, then we need to work together to say, ‘What is the best solution?’”

On the whole, Andersson says he is comfortable with GM’s supplier mix, noting 150 parts makers have GM business in all four of the world’s major vehicle markets.

And GM has 500 suppliers on board to produce parts for three upcoming new programs (midsize, compact and small cars).

As for suppliers in financial trouble, Andersson declines to say how many companies are on his “watch” list.

“We are watching all suppliers all the time,” he says. “We watch them every day.”

Occasionally, auto makers can blame themselves for relying too heavily on distressed suppliers.

John Campi, the new executive vice president-procurement at Chrysler LLC, questions why the auto maker depended on bankrupt-supplier Plastech Engineering Products Inc. for parts on virtually every platform assembled at almost every Chrysler plant.

“The moment Plastech has trouble and shuts down production, Chrysler shuts down,” Campi tells Ward’s. “That’s a huge risk to Chrysler.”

The Plastech episode, which culminated in a failed attempt in court by Chrysler to seize its tools from the supplier, sparked Campi to reassess the auto maker’s sourcing strategy, and he was alarmed to discover Chrysler has only one supplier for most of its components.

“We are virtually single sourced today, and that’s not a good thing for Chrysler,” he says. “We have to manage it differently.”

Campi goes so far as to say Chrysler is “held captive by the supply base,” and that the auto maker definitely needs to diversify its source of parts – something he hopes to achieve in the coming months and years.

Campi describes a recent confrontation with a long-time supplier he describes as complacent.

“I said, ‘You have a sense of entitlement, where you’ve become casual about the quality issues for Chrysler. On a major new program, you failed us badly. At the very same time, you executed flawlessly for Tata’s (Tata Motors Ltd.) Nano,’” Campi recalls.

“I said, ‘that is unconscionable and is totally unaccepted. If you want to know why your portfolio is diminishing, look yourself in the eye.’” Campi is in the process of replacing the supplier.

For Toyota Motor Engineering & Mfg. North America Inc., the corporate culture precludes complacency from taking root internally and among parts producers.

“I think our supply base has gotten a lot smarter and a lot more aware of some of the underlying issues that have existed in the past that have caused some of the other suppliers to get into trouble,” says Chris Nielsen, vice president-purchasing, vehicle parts and materials for TEMA.

He admits the entire North American industry, including Toyota, is struggling with dire economic conditions. But Nielsen sees Toyota’s suppliers doing better today than a few years ago.

“I think we’ve gotten a lot stronger at managing through this financial risk issue,” he says. “It has made our supply base stronger today than it was a couple years ago.”

At Ford Motor Co., Paul Stokes, executive director-global vehicle production purchasing, describes the auto maker’s supply base as “fragile” and is empathetic to the struggles of parts makers.

Although Ford is attempting to step up its global sourcing of components for vehicle programs worldwide, Stokes understands not all suppliers are in a position to support those initiatives.

“There aren’t that many suppliers at this point in time that you’d want to go to and start pushing them around, saying, ‘Hey, get global,’” Stokes says. “Suppliers are generally anxious, same as a lot of folks are anxious. I think we have to be very careful of what we ask the supply base to do.”

And U.S. auto makers must start taking a global view of the financial viability of the supply chain.

“You can’t just say, ‘What’s going on in Michigan or North America,’” Stokes says. “You’ve got to start looking at the health of the supply base on a global basis. What happens on one continent has an effect on another.”

– with Christie Schweinsberg and Byron Pope

tmurphy@wardsauto.com