Peter Anthony, the head of a Chicago-area auto supplier, has spent much of this year feeling left on the sidelines in an industry delivering solid profits to car makers and dealers.

Raw-material prices and labor costs have soared for his firm, UGN Inc., which makes insulation products for vehicles. Hiring had become such a challenge that the company eased its drug-screening policy and recruited former inmates to fill factory vacancies, he said. All the while, car companies keep canceling orders last minute due to their own...

Peter Anthony, the head of a Chicago-area auto supplier, has spent much of this year feeling left on the sidelines in an industry delivering solid profits to car makers and dealers.

Raw-material prices and labor costs have soared for his firm, UGN Inc., which makes insulation products for vehicles. Hiring had become such a challenge that the company eased its drug-screening policy and recruited former inmates to fill factory vacancies, he said. All the while, car companies keep canceling orders last minute due to their own challenges with a computer-chip shortage, denting revenue.

“We’re being hit from all sides,” Mr. Anthony said.

It has been a pretty good year for many in the car business. But one swath of the sector has largely missed out: parts suppliers.

Some auto-parts makers say the outlook is almost as gloomy as it was in 2008 and 2009, when sales collapsed due to the recession.

“How are suppliers going to offset these cost increases we’ve experienced without getting price relief from [the car companies]?” Mr. Anthony said. UGN is losing money and recently began discussions with his customers about revising terms.

Aliou Sarre, 23, works on processing fabric; UGN, which makes carpeting and insulation systems for cars, hasn’t benefited from high retail prices that have lifted the finances of car makers and dealers.

Finished goods at the UGN plant. Last-minute order cancellations are another complication, as car makers adjust to the computer-chip shortage.

The biggest rub, however, is his company is losing out on the auto industry’s frothy pricing, he added. With tight inventories, car buyers are paying record sums for new vehicles, and that has led both auto makers and dealerships to post healthy earnings this year, despite disruptions caused by the computer-chip shortage.

Mr. Anthony’s firm is one link in a global supply chain that is buckling under the pressure of labor shortages, rising freight and commodity costs, and manufacturing disruptions.

Suppliers typically do business with the car companies under fixed contracts that set prices for the length of a vehicle program—which can run longer than five years—and are difficult to renegotiate, executives and industry attorneys say. Auto-parts makers also rely on a steady flow of work orders and efficient, just-in-time supply chains to contain costs.

Tensions are building between automotive suppliers and their car-maker customers over the escalating costs; Terri Fink, 58, worked on a component.

But delivery delays and canceled orders resulting from the chip shortage, combined with soaring costs across their businesses, are putting even more pressure on already-thin profit margins, executives and industry analysts say.

Tension over who will shoulder the escalating costs is mounting. Smaller, cash-strapped suppliers are increasingly refusing to ship parts unless they get a price increase, said John Trentacosta, a Detroit-area attorney who represents suppliers.

“For a lot of them, it’s desperado time,” he said.

Lately, even large suppliers who ship directly to car companies are seeking better terms, attorneys and executives say. Cooper Standard Automotive Inc., which makes brake-fluid lines and other components, recently told analysts it’s asking customers for price increases totaling about $100 million.

Last Monday, Faurecia SE, a French maker of vehicle interiors, was the latest among many large auto suppliers to cut profit forecasts in recent weeks. It cited choppy production schedules from its customers, the car companies, and labor shortages that have inflated costs associated with opening a facility in Michigan.

A hiring sign outside UGN Automotive; filling vacant jobs has become so difficult that UGN has had to ease its drug-screening policies and in some cases recruit former inmates.

A recent survey by the Original Equipment Suppliers Association, a trade group, showed that sentiment among executives about next year’s outlook was at its second-lowest level since the financial crisis, better only than in spring of 2020.

Representatives for several major car companies said they have worked with suppliers to ease inflationary pressures but that specific aspects of contract terms are private.

General Motors Co. President Mark Reuss said the auto maker’s willingness to renegotiate depends on the contract’s length and other factors, but the preference is to stick to terms.

“I would say passing things through is not the way to create value for our customers,” he said during a Barclays

virtual investor conference.

VIDEO

The number of semiconductors in a modern car, from the ignition to the braking system, can exceed a thousand. As the global chip shortage drags on, car makers from General Motors to Tesla find themselves forced to adjust production and rethink the entire supply chain. Illustration/Video: Sharon Shi The Wall Street Journal Interactive Edition

So far, the North American automotive-supply base has largely avoided the high numbers of bankruptcies and distressed sales experienced during the 2008-2009 downturn, industry consultants and attorneys say.

Many parts suppliers entered 2021 with relatively strong balance sheets, bolstered by federal support and cash cushions hurriedly built up at the onset of the pandemic, said Chuck Moore, managing director at restructuring firm Alvarez & Marsal.

Still, with rising commodity costs and supply-chain pressures lingering through next year, many suppliers are taking out loans, tapping credit lines or trying to renegotiate terms with customers, Mr. Moore said.

“We’ve been getting more calls from suppliers because of liquidity pressures,” he said. “I expect that’s going to continue.”

Work on a car underfloor at UGN; many auto suppliers are taking out loans and tapping credit lines to keep going.

The financial pressures building on the auto-supply base come against the backdrop of technological change that is forcing suppliers to invest in new areas, as auto makers pour money into the development of electric and driverless cars.

“Electrification itself is turning the industry on its ear, and then you pile on top of that this traffic jam of issues,” said Mary Buchzeiger, chief executive officer of Lucerne International, a Detroit-area supplier of stamped metal parts. “We had an easier time in 2008.”

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Brian Pelke, president of Kay Manufacturing Inc., which makes parts that go into engines and transmissions, said auto makers routinely have canceled entire weeks of production with little notice. That leaves his Chicago-area company, which has about 150 employees, stuck with excess inventory and short cash flow.

“The car companies have been making record profits,” said Mr. Pelke, “while the rest of us are just trying to get by.”

Such is the pressure that some suppliers are trying to renegotiate terms with car makers; Melina Reyes, 52, left, with an underfloor component.

Write to Mike Colias at Mike.Colias@wsj.com