Chapter 11 may be the safest place for some metalcasters in the coming weeks or months. Intermet Corp., despite some resourceful management efforts over the past three years, checked itself into bankruptcy court this week. It’s the second stay there for Intermet – which filed for creditor protection just about four years ago under circumstances that were similar to what’s happening now.

Back in 2004, the issue that tripped up Intermet (and Citation Corp., too, by the way) was the steady rise in raw materials and energy prices. Those issues are still serious concerns, but now there is also the ominous situation of the automotive industry … the major customer for many metalcasters.

Intermet’s filing was the news of the day on Wednesday this week, but the word on this impending heartburn went out earlier with the release of the Summer 2008 Automotive Industry Review by the business think-tank Grant Thornton L.L.P.

The report speculates that about 30% of all North American auto parts suppliers may be on the brink of bankruptcy because of declining vehicle sales (especially trucks) and increasing commodity costs. Grant Thornton sees no relief in sight for suppliers who are heavily concentrated in the truck/SUV segment. And, it sees no potential for these manufacturers to pass on to customers the steadily rising costs of raw materials.

According to a statement by Grant Thornton’s Kimberly Rodriguez, "The decline in (automotive) industry volumes and the shift to more fuel-efficient vehicles is creating a massive ripple effect in the supply chain. The full impact of very low truck and SUV production in the second half of the year and any new production cutbacks this fall—something we believe is likely—will only make supplier cash flow problems more difficult to manage."

All this has been apparent in the metalcasting market for much of the past year. Diecaster Spartan Light Metal Products is not in bankruptcy, but it has started scaling down its operation in the hope of surviving “overall weakness in the U.S. economy.” Spartan reportedly has been particularly hard hit by Ford Motor Co.’s lower production volume (though, its own statements only refer to customers that have made “dramatic changes in their order patterns.”)

This is the effect of a U.S. economic pattern that has been developing for at least a year. Manufacturers were initially confident that the declining value of the U.S. currency would enhance their sale opportunities to global customers — and in various cases, it has done so. But, the declining dollar devalues everything it touches, and punishes everyone whose income is paid in dollars, whose purchases are made in dollars, and whose assets are valued in dollars. That means everyone.

It's always possible to find good news amid the gloom. The recent pattern for bankruptcies in the metalcasting market suggests success with a "pre-packaged" approach that will revamp the financial side of a business while the operations continue as usual. That would make sense for Intermet, where most of the past three years have been dedicated to organizational overhaul and a renewed customer focus. If so, it would be another sign that, as the researchers detect, the problem is with the market, not the manufacturer. And that may mean Intermet won't be alone in court.