Supplier Aid May Start in Days, Trade Group Says (Update1)
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By Alex Ortolani
April 3 (Bloomberg) -- The U.S. may begin a $5 billion aid program for auto-parts suppliers to General Motors Corp. and Chrysler LLC next week, a partsmaker trade group said.
GM and Chrysler have been meeting with suppliers, explaining U.S. guarantees for bills to automakers, Neil De Koker, president of the Original Equipment Suppliers Association, said in e-mails today. Suppliers are embracing the aid after President Barack Obama’s car task force said bankruptcy might be the best option for GM and Chrysler to reorganize.
“The suppliers I’m talking to are looking at it,” said Mike Wall, a consultant and analyst with CSM Worldwide Inc. in Grand Rapids, Michigan. “Those that are under the most distress and are looking to shore up their operations would be the first ones to jump on it.”
The 4,000 companies that supply parts to U.S. automakers are struggling amid a 37 percent plunge in domestic vehicle sales this year through March. The U.S. Treasury Department announced the aid program March 19 to keep a GM or Chrysler bankruptcy from cascading into supplier shutdowns that cripple the industry.
Suppliers usually get paid 45 to 60 days after shipping parts to an automaker. The government has offered to immediately buy payments promised by GM, of Detroit, and Chrysler, of Auburn Hills, Michigan, for a 3 percent fee. For a 2 percent fee it would guarantee the payments in the event of an automaker bankruptcy.
Too Expensive?
The Original Equipment Suppliers Association, based in Troy, Michigan, said last month the program is too costly. Some suppliers may reject the program because of the terms, Wall said.
The trade group represents more than 400 partsmakers, including suppliers Visteon Corp., based in Van Buren, Michigan, and TRW Automotive Holdings Corp., based in Livonia, Michigan.
Laura Marcero, a Southfield, Michigan-based partner in consulting firm Grant Thornton LLP, said last week she feared delays in starting the aid program could cause supplier failures. That wouldn’t be the case if the program begins next week.
