Auto Suppliers Get $5 Billion From Treasury
By Michelle Krebs March 19, 2009By Bill Visnic
The U.S. Treasury Department Thursday extended support to the auto industry's financially teetering supplier base, saying it will extend $5 billion in loan support that will be channeled through major automakers.
The Treasury Department will guarantee payment of receivables for components supplied to automakers.
The action is called the Supplier Support Program and "will help stabilize a critical component of the American auto industry during the difficult period that lies ahead," said Treasury Secretary Timothy F. Geithner in a statement.
The Supplier Support Program guarantees a supplier will be paid for parts shipped to an automaker, protecting the supplier from an automaker's potential inability to pay. Supplier trade groups for some time insisted the sector needs financial intervention similar to that extended to automakers.
Establishment of the SPP may be the initial signal the government, via the Obama administration's Auto Industry Task Force, could be considering bankruptcy as preferable to continuing billions in loan support for either or both of General Motors Corp. and Chrysler LLC, which so far have collectively received more than $17 billion in government funding to continue daily operations.
Consultancy firm Grant Thornton LLC this week issued a caution saying many of the auto industry's suppliers are on the verge of collapse -- and called the situation more threatening to the auto sector than the potential bankruptcy of a major automaker.
Grant Thornton partner Laura Marcero said in a release, "The most immediate and pervasive risk is a wholesale collapse of the automotive supply base," adding that hundreds of major suppliers "may be at high risk."
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