US Auto Suppliers Seek $25.5Bn In Federal Aid
04 Febrero 2009 - 5:13PM
Noticias Dow Jones
U.S. auto suppliers are seeking $25.5 billion in federal aid as
falling sales and production cuts push more towards the brink of
bankruptcy.
Suppliers have been pressing their case with the U.S. Treasury
in recent weeks in the wake of the nearly $22 billion in aid
already granted to General Motors Corp. (GM), Chrysler LLC (C.XX)
and their finance arms.
The 11-page request, representing 400 suppliers, was submitted
to the Treasury this week by the Motor & Equipment
Manufacturers Association, or MEMA. The association declined
comment.
"Without immediate assistance to suppliers, the country will
face massive job losses and the eventual breakdown of the entire
automotive sector in the United States," according to a copy
obtained by Dow Jones Newswires.
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.
The suppliers want $7 billion to create a "quick pay program" in
which auto makers could pay suppliers within 10 days of receiving
product instead of the traditional 45-55 days.
A survey of suppliers by the Original Equipment Manufacturers'
Association last month said average accounts receivable widened to
51 days in January.
Suppliers are also seeking $10.5 billion to guarantee
receivables of suppliers whose customers have received federal
loans, including GM and Chrysler.
A guarantee would allow for a pool of federal funds to provide a
backstop for commercial lending losses on loans to suppliers.
U.S. light-vehicle sales fell to an annualized 9.57 million in
January, and some OEMA members warn they could fall as low as 7
million if the recession persists, though most industry estimates
are around 10 million.
OEMA members are working at 60% utilization rates, according to
the January survey.
"More than 40 major suppliers filed for Chapter 11 restructuring
in 2008, and industry surveys indicate that approximately one-third
of all suppliers are in imminent financial distress, with another
one-third indicating that they will be in distress during the first
quarter of 2009," according to the request.
"Without immediate assistance to suppliers, the country will be
faced with faltering vehicle manufacturers, massive job losses and
the eventual breakdown of this country's largest manufacturing
sector."
A further $8 billion is being sought in direct access to federal
loans.
A major bankruptcy by a supplier could force the closure of
automotive assembly plants across the country since many parts
arrive at assembly plants just hours before they are needed on the
assembly line.
Such companies as American Axle & Manufacturing Holdings
Corp. (AXL), ArvinMeritor Inc. (ARM), Lear Corp. (LEA) and Visteon
Corp. (VC) have taken major financial hits as auto makers cut
production in the wake of slumping sales both here and around the
world.
Most of those production cuts were made with little warning,
intensifying the financial pressure as suppliers scramble to cut
workers and stop lines.
-By Jeff Bennett, Dow Jones Newswires; (248) 204-5542;
jeff.bennett@dowjones.com