2nd UPDATE: US Auto Suppliers Seek Up To $10 Billion In New Aid
June 09 2009 - 3:51PM
Dow Jones News
U.S. auto-parts suppliers plan to ask the Obama administration
for up to $10 billion in new aid to forestall a crisis triggered by
the bankruptcies of General Motors Corp. (GMGMQ) and Chrysler
LLC.
Supplier trade groups will meet Wednesday with President Barack
Obama's auto task force at the Treasury Department to warn that
hundreds of companies could collapse without the aid. They are
mainly requesting that the government guarantee between $8 billion
and $10 billion in loans industrywide so banks will have the
confidence to lend to parts suppliers.
Stabilizing the fragile supply base is critical to ensuring the
long-term viability of GM and Chrysler, who are surviving on tens
of billions of dollars in taxpayer money, said Neil De Koker,
president and chief executive of the Original Equipment Suppliers
Association.
"We could end up having all that money go to waste because they
won't be able to start up without suppliers," De Koker said. "If
there's just one key part missing on a car, you can't build
it."
His group along with the Motor and Equipment Manufacturers
Association have prepared a 71-page presentation arguing that as
many as 500 parts suppliers could be forced to liquidate this year.
They cite several independent studies.
A Treasury Department spokeswoman said administration officials
"will continue to work with the companies and monitor the auto
supply base going forward." She declined to comment further.
The Treasury earlier this year put in place a $5 billion program
to guarantee GM and Chrysler payments to suppliers. But supply
groups said the program falls far short of what they need.
Suppliers, already hurt by the plunge in auto sales and the
broader recession, are facing a deeper crisis because of production
slowdown associated with the restructurings of GM and Chrysler.
Visteon Corp. (VSTN) and Metaldyne Corp. filed for bankruptcy
protection last month. Lear Corp. (LEA) and TRW Automotive Holdings
Corp. (TRW) are attempting to reach new agreements with their
creditors by June 30.
Because suppliers receive payments in cycles that span several
months, many companies will soon stop receiving payments from
Chrysler, which halted vehicle production earlier this year.
Suppliers plan to propose expanding loan programs at the Small
Business Administration and the Agriculture Department to help
suppliers, De Koker said.
The supplier groups also plan to meet with members of Congress
Thursday to press for alternatives, including legislation, if the
administration declines to provide further aid.
Suppliers account for more than three-quarters of auto sector
employment in the U.S., according to a Chicago Federal Reserve
study, with staffing estimated at around 600,000 across the
industry.
-By Josh Mitchell, Dow Jones Newswires; 202-862-6637;
joshua.mitchell@dowjones.com
(Jeff Bennett in Detroit contributed to this article.)