Uber Blamed for Killing Leather Seats by Busted Auto Supplier

(Bloomberg) -- Uber has been blamed in the past for crushing the taxi industry, labor rules, privacy -- and now leather car seats?

That's the contention of bankrupt GST AutoLeather Inc., which makes leather and components for virtually ever major auto company. The rise of Uber Technologies Inc. and Lyft Inc. helped cut demand for new cars that include its seat coverings, leaving GST buried under $196 million of debt, according to its Tuesday bankruptcy filing.

“The climbing popularity of ride-sharing services, such as Uber and Lyft that diminish consumers' needs for their own cars,” helped push the Southfield, Michigan-based company over the edge, wrote Jonathan Hickman, GST's chief restructuring officer and an expert in turnarounds with Alvarez & Marsal.

GST's explanation may not sit well with everyone, considering that the filing came just as automakers posted the fastest pace of monthly U.S. sales since 2005. The idea that ride-sharing will cut into new-car sales flies in the face of at least two pieces of conventional wisdom.

First, more people theoretically can afford a new car rather than a used one by taking on a part-time role as a taxi driver. In India, at least, this idea has wheels, thanks in part to ride-booking app Ola's extension of loans to its drivers.

The other is that ride-hail customers are, quite simply, disgusting. Just like big car rental companies and taxi drivers, Uber and Lyft drivers must deal with cars that get dirty much faster as customers get sick or wipe their burger-greased fingers on the upholstery. Ride-hail vehicles also rack up more miles than the average car.

Representatives for Uber didn't immediately reply to a message seeking comment. Lyft's Scott Coriell declined to comment.

To be sure, GST spread the blame, citing more durable vehicles that survive longer on the road. It's also looking at manufacturing figures rather than sales, giving it a potential longer-term view of the situation -- especially considering some automakers said this month that Hurricane Harvey gave their sales results an unusual boost.

Looking into the supply chain, where GST says it serves as an essential link to manufacturing, the leather maker said automobile output has fallen 4 percent over the past year, and there are fewer manufacturing orders as dealers try to deplete swollen inventories. The company's roots date to a 1933 tannery that got into the auto industry in 1946.

--With assistance from David Welch

To contact the reporter on this story: Tiffany Kary in New York at tkary@bloomberg.net.

To contact the editors responsible for this story: Nikolaj Gammeltoft at ngammeltoft@bloomberg.net, Rick Green, Kenneth Pringle