Auto Parts Makers Set to Seek as Much as $10 Billion More in U.S. Aid
Tuesday, June 9, 2009
Auto parts suppliers are planning to ask the Obama administration for an additional $8 billion to $10 billion in federal aid.
The Motor and Equipment Manufacturers Association is preparing to present its proposal for several aid programs tomorrow during a meeting with the president's autos task force. On Thursday, the association hopes to meet with members of Congress.
"It is necessary we address the supplier needs in the short term and that we have longer-term goals to have a viable and stable supply base," said Ann Wilson, the association's senior vice president of government affairs.
The suppliers' latest push for aid comes as members of the administration search for additional ways to revitalize the nation's auto supply base, which employs 686,000 workers. The administration is exploring several options, but has not settled on any particular financing vehicle, said sources familiar with the matter.
In March, trade groups helped negotiate a $5 billion government package to back payments by General Motors and Chrysler to suppliers. But a survey by these groups found that only about half of the automakers' major suppliers were eligible or elected to participate.
Smaller companies, which act as subcontractors to the automakers' direct suppliers, have not seen that money trickle down. Many are struggling financially as automakers curb production in response to slow sales. Last month, Metaldyne and Visteon, Ford's largest supplier, filed for Chapter 11 bankruptcy protection. This year at least 13 direct suppliers have filed for bankruptcy protection or had their assets foreclosed, according to the Original Equipment Suppliers Association. That's not counting those that have simply liquidated.
"The need for action is immediate," the suppliers say in their latest aid request.
The trade groups recommend four programs to strengthen companies.
They suggest speeding up aid programs, such as an Energy Department fund for retooling, and expanding existing loan guarantee programs to assist more suppliers. The groups have set their sights on broadening Small Business Administration and Agriculture Department rural development loans.
"Given that these programs are in operation, slight modifications to the programs could quickly open the door for supplier assistance," the proposal says.
In addition, the groups want the government to develop incentives to spur commercial lending in the auto supplier sector. And they suggest that the government provide more debtor-in-possession financing to GM and Chrysler so that the companies could "inject immediate liquidity into the supply base."
Longer term, the suppliers would like to see a dedicated program within the Small Business Administration or an industrial development bank aimed at aiding manufacturers during periods of economic distress.