Supplier Groups Explore Aid to Sustain Vehicle Production
The Motor & Equipment Manufacturers Association and Original Equipment Suppliers Associations are discussing the plight of the automobile industry with President Obama’s administration, the Treasury Department and members of Congress as the federal government advances plans to disburse funds from emergency financial relief legislation approved last year.
In a Feb. 5 statement, the two groups said they were “exploring options to address the immediate cash needs and longer-term viability of the motor vehicle parts supplier industry.” No formal request has been made for disbursements from the Troubled Asset Relief Program, or TARP, which President Bush signed into law Oct. 3.
That program, primarily designed to aid banks in difficulty because of failed loans and investments, also was the source for a multibillion-dollar loan package to several automotive manufacturers whose sales have sunk to their lowest levels in decades as the recession pinched off demand.
In their joint announcement, the two groups said the suppliers to the entire vehicle manufacturing industry are feeling the same effects as automakers.
“We have had constructive conversations with Treasury and elected officials in Washington, but no official request has been submitted at this time,” said Bob McKenna, chief executive officer of MEMA. “Suppliers now face unprecedented challenges that have created a crisis in our industry, with consequences for the nation’s economy as a whole.”
Suppliers are struggling to obtain credit, and an onslaught of bankruptcies can be expected in the coming weeks that could further weaken the U.S. manufacturing base, McKenna said in the statement.
Consolidation in the parts manufacturing industry has reduced the number of suppliers to fewer than 5,000 from 20,000 in 1990, according to OESA.
MEMA and OESA said in the statement they have offered three approaches that could be taken, either singly or together:
• Provide more funds to auto-makers through TARP to speed payments to suppliers.
• Guarantee the receivables of suppliers to Chrysler, Ford and General Motors to ensure that the suppliers have collateral for their working capital needs and therefore can obtain loans from traditional banking sources.
• Provide suppliers with direct access to TARP funds.
“These options are being evaluated and discussed actively with Treasury and congressional representatives,” said Neil De Koker, president of OESA. “Because of the urgency, we believe all options — including these — should be fully explored. Action is needed because it is impossible to separate the financial health of suppliers from that of vehicle manufacturers.”
“The failure of one or more key suppliers — large or small — can shut down entire supply chains and result in the closing of multiple vehicle assembly plants, directly affecting the future viability of domestic and foreign manufacturers,” De Koker said.
