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Auto suppliers face crisis, urge quick faction on federal bailout request
The options laid out by suppliers include seeking $8 billion in direct loans from the $700 billion Troubled Asset Relief Program for 400 distressed suppliers.
Another option presented was routing a new $7 billion loan to GM and Chrysler that could be used to speed payments to suppliers, reducing payments from between 45 days and 55 days to just 10 days. The program would utilize GM and Chrysler electronic payment systems. It would aid Ford Motor Co.'s suppliers as well, since 51 percent of Ford's suppliers also are GM's suppliers.
Talks between Treasury and suppliers are continuing on a daily basis, with Treasury officials in the TARP office seeking more information about the projected 2009 auto market in trying to assess how much aid to grant.
McKenna said the supplier industry cannot access credit from traditional lenders to pay normal operating expenses. Without immediate credit, 'an onslaught of supplier company bankruptcies is inevitable in the coming weeks and months' he said in a statement.
For more than a decade, the parts manufacturing industry has experienced dramatic consolidation and will continue to do so. According to OESA, 20,000 companies supplied automakers in 1990; today, that number has fallen in less than 5,000. Suppliers still employ an estimated 700,000 people..
A separate report to Treasury from Ducker Worldwide LLC, a consulting firm, said suppliers are now getting paid on average in about 47 days. 'Tier 2's and Tier 3's are especially vulnerable,' they said.
The report noted that more than 40 suppliers filed for bankruptcy in 2008. 'Without immediate assistance to suppliers the country will be faced with faltering vehicle manufacturers, massive job losses and the eventual breakdown of the country's largest manufacturing sector,' the report said.
Suppliers may see just $2.4 billion in revenue in March, down from $8.4 billion a month in the fourth quarter of 2008. 'By March 1, 2009, a cash crisis will occur as raw materials need to be replenished,' the report obtained by The Detroit News said.
A third proposal called for the Treasury to guarantee payments to suppliers in the event of an auto manufacturer bankruptcy, which would allow suppliers to borrow against those outstanding payments from automakers. It wouldn't be a direct outlay of government money, but require the government to set aside a reserve of up to $10.5 billion.
Auto production is expected to hit its lowest level in the first quarter since 1985, suppliers said. Chrysler LLC's payments to suppliers could fall to just $505 million in March, the report said, down from $2.3 billion in December.
Another option presented was routing a new $7 billion loan to GM and Chrysler that could be used to speed payments to suppliers, reducing payments from between 45 days and 55 days to just 10 days. The program would utilize GM and Chrysler electronic payment systems. It would aid Ford Motor Co.'s suppliers as well, since 51 percent of Ford's suppliers also are GM's suppliers.
Talks between Treasury and suppliers are continuing on a daily basis, with Treasury officials in the TARP office seeking more information about the projected 2009 auto market in trying to assess how much aid to grant.
McKenna said the supplier industry cannot access credit from traditional lenders to pay normal operating expenses. Without immediate credit, 'an onslaught of supplier company bankruptcies is inevitable in the coming weeks and months' he said in a statement.
For more than a decade, the parts manufacturing industry has experienced dramatic consolidation and will continue to do so. According to OESA, 20,000 companies supplied automakers in 1990; today, that number has fallen in less than 5,000. Suppliers still employ an estimated 700,000 people..
A separate report to Treasury from Ducker Worldwide LLC, a consulting firm, said suppliers are now getting paid on average in about 47 days. 'Tier 2's and Tier 3's are especially vulnerable,' they said.
The report noted that more than 40 suppliers filed for bankruptcy in 2008. 'Without immediate assistance to suppliers the country will be faced with faltering vehicle manufacturers, massive job losses and the eventual breakdown of the country's largest manufacturing sector,' the report said.
Suppliers may see just $2.4 billion in revenue in March, down from $8.4 billion a month in the fourth quarter of 2008. 'By March 1, 2009, a cash crisis will occur as raw materials need to be replenished,' the report obtained by The Detroit News said.
A third proposal called for the Treasury to guarantee payments to suppliers in the event of an auto manufacturer bankruptcy, which would allow suppliers to borrow against those outstanding payments from automakers. It wouldn't be a direct outlay of government money, but require the government to set aside a reserve of up to $10.5 billion.
Auto production is expected to hit its lowest level in the first quarter since 1985, suppliers said. Chrysler LLC's payments to suppliers could fall to just $505 million in March, the report said, down from $2.3 billion in December.
