2nd UPDATE:GM, Chrysler Secure $3.5 Billion From Supplier Aid Program
08 Abril 2009 - 2:29PM
Noticias Dow Jones
General Motors Corp. (GM) and Chrysler LLC secured a combined
$3.5 billion in U.S. federal aid to bolster suppliers under a
program launched Wednesday.
Although the aid is limited to GM and Chrysler suppliers, the
impact is expected to ripple through the industry since those same
companies provide parts to other auto makers operating in the
U.S.
GM will oversee $2 billion under the U.S Department of Treasury
program while Chrysler will oversee $1.5 billion. The money will be
used to stabilize payments to suppliers, many of which are in, or
on the edge, of bankruptcy.
The Treasury announced last month it was setting aside a pool of
$5 billion to fund the program. GM and Chrysler can ask for more
money - up to the $5 billion amount - if needed. The money the auto
makers received Wednesday was in response to their initial aid
requests.
Ford Motor Co. (F) declined to take part, stating that it can
make supplier payments from its own funds. The auto maker is
helping its suppliers on a case-by-case basis, offering everything
from loans to a change in payment terms.
The Treasury's supplier aid is designed to prevent collapse
among companies suffering from a liquidity crunch as auto
manufacturers pare production. Visteon Corp. (VSTN), Lear Cop.
(LEA), American Axle & Manufacturing Holdings Corp. (AXL) and
TRW Automotive Holdings Corp. (TRW) are struggling.
The program is expected to be short term, with users relying on
the support for three or four months, according to a person
familiar with the plan.
Suppliers are starting to apply to GM and Chrysler, and can opt
to insure their accounts receivable or have the auto maker
accelerate payments for parts in return for a fee.
"It is a voluntary program for suppliers and from our
perspective there appears to be significant interest in the
program," said Dan Flores, a GM spokesman. "The focus now is to get
the program up and running as quickly as we can."
Chrysler said its program, administered by Citibank, is
available to suppliers that are incorporated in the U.S.
One senior industry executive said it remained unclear how much
relief the program would generate, citing the 3% fee being levied
on federal loans used to accelerate payment.
"There is a real cost - 3% is quite a bit for these companies to
pay to participate," said Jim Lentz, president of Toyota Motor
Sales USA Inc., on the sidelines of the New York auto show.
About two-thirds of Toyota's parts makers in the U.S. also
supply parts to GM, Chrysler and Ford.
Lentz said 100 of Toyota's 500 top-tier parts suppliers are in
some level of distress, and 12 are in severe trouble.
-By Jeff Bennett, Maya Jackson Randall and Sharon Terlep, Dow
Jones Newswires; 248-204-5542; jeff.bennett@dowjones.com