Washington to Auto Suppliers: No More Money
By Michelle Krebs June 17, 2009WASHINGTON -- The U.S. Department of Treasury turned down a request by auto suppliers for additional financial aid, saying it believes the supply chain is stable enough without immediate assistance -- and besides it isn't the government's role to interfere in the contraction of the supplier market.
Two trade associations representing suppliers had asked for the government to guarantee between $8 billion to $10 billion in loans so banks will lend to the suppliers. That's in addition to the $5 billion the government provided to suppliers earlier this year. Those funds are administered through automakers.
President Obama's auto task force, however, did say it would step in if the supply chain unravels and vehicle assembly plants are forced to close due to parts shortages.
And the prospects of that happening are increasing daily as suppliers look for funding to gear up to supply Chrysler, which shut down all of its plants when it filed for bankruptcy, and GM, which has imposed extended shutdowns of many of its plants.
So far this year, about 20 suppliers have filed for bankruptcy including: Visteon Corp.; Noble International; and Metaldyne, trying to sell off pieces to private equity firms and other companies. Delphi Corp. has been in bankruptcy for more than three years and is just now emerging from it.
Others are edging toward bankruptcy. Lear Corp. is said to be close; so is Cooper-Standard Automotive, which missed a key interest payment this week.
Ailing American Axle & Manufacturing is in court battling to get its steel supplier to deliver the goods regardless of American Axle's shaky financial situation. American Axle is so critical to GM that when workers went on strike against the company, it shut down most of GM's plants.
France's Michelin, the world's second-largest tiremaker, this week announced plans to eliminate 2,900 jobs, about 10 percent of its French workforce, as part of a reorganization of to focus on higher-margin tires in the slumping world economy.
Still other companies are simply going out of business without filing for bankruptcy.
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