Monday, March 23, 2009
Federal aid bails out suppliers
Posted By David Lucas
DETROIT — The federal government has joined automakers in a frantic scramble to keep suppliers alive.
A $5 billion federal assistance package unveiled last week will help some suppliers' cash flow by extending credit and guaranteeing loans from commercial sources. General Motors and Chrysler LLC will decide which of their hobbled suppliers get the aid. Ford Motor Co. says it won't participate in the program.
The aid won't make up for a 50 percent slash in vehicle production since December and is far less than the $18.5 billion parts makers had sought through various industry associations.
Still, Wilbur Ross, chairman of International Automotive Components Group, said the bailout marked "the best day the auto industry has had in a long time."
The government action followed increasing efforts by automakers to support suppliers. Toyota Motor Sales U.S.A. Inc. and other companies were vocal advocates of federal aid. They continue to offer assistance case-by-case, and in recent weeks they have:
1. Bought outstanding debt of troubled suppliers.
2. Created new schemes to pay subsuppliers directly, bypassing at-risk Tier 1 suppliers.
3. Agreed to take back factories from parts-making operations they spun off years ago.
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