Auto Supplier Aid Request Rejected By Obama Administration

WASHINGTON — The Obama administration has turned down a request by auto suppliers for up to $10 billion in additional federal aid to help the parts companies deal with the bankruptcies of General Motors and Chrysler.

The Treasury Department said in a statement Tuesday that an existing $5 billion support program for auto parts suppliers was playing an important role in stabilizing the nation's auto supply base. "No changes have been made to funding, but will continue to monitor the situation," the department said.

Suppliers have lobbied for $8 billion to $10 billion in loan guarantees to help them raise money to buy raw materials and pay employees as Chrysler and GM resume production.

Supplier trade groups met with members of the Obama administration's auto task force and lawmakers last week.

Task force officials told industry leaders they had already provided plenty of support but didn't see the need for further action, said Neil De Koker, president and chief executive of the Original Equipment Suppliers Association.

"They basically said, 'You know things are smooth right now; we don't see disruption in the industry; assembly lines aren't being shut down because of part shortages,'" De Koker said. "They left the door open."

Obama's task force created a $5 billion financing support program in April to keep parts flowing for General Motors Corp. and Chrysler Group LLC. It also provided government guarantees to finance parts that were already shipped to automakers but had not been paid for.

GM and Chrysler have participated in the program, which allows the car companies to choose how the aid is distributed among the suppliers.

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Hundreds of suppliers of all sizes manufacture bolts, axles, transmissions and other parts for assembly in car plants. Suppliers have been hurt by the dramatic downturn in auto sales and some analysts have been concerned the supply chain could collapse. Government aid and payment guarantees for GM and Chrysler have kept most suppliers afloat.

About 20 suppliers have filed for bankruptcy this year, including Visteon Corp., Ford Motor Co.'s largest supplier, and Metaldyne Corp.

GM and Chrysler, which are both working through bankruptcy filings, are temporarily shutting down some factories for up to three months because of growing inventories.

If the plants aren't running, suppliers have no income and must deal with a 45-day lag between when they ship parts and when they are paid again. The potential cash crunch has prompted industry groups to seek additional federal support.

De Koker said some suppliers could be forced to shut down or liquidate due to a lack of cash while others may be unable to provide parts once automakers resume production.

"The entire industry is running at such low capacity that when the plants start ramping up again the cash won't be there to pay for parts and labor," he said. "If we don't find some way to get credit to suppliers, there are going to be suppliers who just can't make it."

Lawmakers from auto states are seeking other ways to help supplier companies. Sen. Sherrod Brown, D-Ohio, was expected to announce a plan on Wednesday to provide a new funding source to help small and midsize auto suppliers revamp their facilities to create clean energy jobs.

"We'll have to follow through and see what other options are available, but I think it's very important that we do everything we can to help suppliers," said Sen. Debbie Stabenow, D-Mich.

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AP Business Writer Chip Cutter in New York contributed to this report.

Comments

[bola47]

better to give the pigs on wall street who made bad decisions and investments the cash so they can get their fat bonus checks. leave the american worker to fend for himself. thank you ronald reagan and the rest of the republican party for destroying this country.

[KillTheMessenger]

I think the suppliers need to go back to the car companies and say

"Look guys, here are the new payment terms. It's 50% prepayment at the time of order and 50% at the time of delivery. Take it or we can guarantee that there won't be any delivery because we won't be around to make this stuff."

Problem solved.

[dillydawg]

Sounds like a starter plan.

[therealredstateblues]

good luck with that

[KillTheMessenger]

It's something the suppliers should have done a long time ago. Being a car manufacturer is only the second worst business plan on the face of the planet. Being a car manufacturer's supplier is far worse, still.

[Realization]

Having Treasury in the middle of this is a huge mistake. It should be handled in a strategic way by a strong and competent Department of Industry and Trade that fosters U.S. competitiveness by understanding industry and working with it. We, of course, don't have such an organization. Our international competition does. And, by the way, industrial policy does not mean bureaucrats deciding everything as opponents often say. Just look at how other countries do it. It works pretty well. We should be looking abroad for best practices. The problem here, of course, would be Congress and the vested interests that control it.

We need to regain leadership in manufacturing. That means deciding to eliminate the trade deficit and setting about doing it. Won't happen without a plan. The competition has plans.

[therealredstateblues]

exactly

[therealredstateblues]

there are several thing that need to be done to fix our trade deficiti and put mnufacturing back on its feet

here are few examlples

coherent industrial policy
VATS and tariffs - which are legal under the WTO
Export rebates for domestic exporters (nearly all other indusrial countries do this but us)
fix or get out of unfair and unsustainabe trade deals
increased enforcement of intellectual property rights
increased product safety inspection of imported goods
fix helth care that puts US mfrs at a huge competitive disadvantage
increased enforcement of safety. labor and envronmental requirements in trade deals

Proceeds from tariffs could be put to work doing any of the following

bolster the social safety nets - education, wage insurance, unemployment benefits, health care
increased border security and import safety inspections
paying down deficits, making us less beholden to foreign lenders
compensation for those companies and workers harmed by unfair trade

I am surprised the anti tax crowd doesn't latch on to the idea of tariffs - pre IRS tariffs is where the US got the majority of its revenue - this way we could reduce the tax burden on individuals and businesses

Of course then there will be the "protectionism" yadda yadda, but there simply is no credible evidence that they will have any negative effect - especially when we have staggering trade deficits. there is already a trade war going on and the US is losing it

[GoodFeathers]

"I am surprised the anti tax crowd doesn't latch on to the idea of tariffs"

You must be joking. Those teabaggers aren't people who really cared about this country and its future. They are bunch of bigots and right wing extremists you saw at McCain/Palin rallies. The only reason they came out on April 15, 2009 was because they still couldn't content with the fact that a black man is the president. Seriously, have you seen them talk about tax? No but you heard them scream about Obama's birth certificate, false gun control laws, abortion, Obama bowing to the Saudi king and how he will be socialist. That crowd demonstrated for everything but tax.

[illusionpainter]

AMEN!!!!!

[illusionpainter]

What was the point in financing the Auto Companies if you don't help the suppliers? Well. I guess GM, Chrysler and Ford with them this time to LIQUIDATE!!!!! It will also shut down every other car company here, even the foreign ones. It will effect other manufacturing industries too because they use some of these suppliers too. Good going WALL STREET AUTO TASK FORCE!!!!!! You Wall Street people are just intent on destroying the entire country and world as a matter of fact.

I live in Michigan. I see and hear about this everyday. My husband's GM plant is already having trouble getting some parts, they can't even get paper for the computer printers. They can barely get paper towels or toilet paper because people won't deliver unless their company gets paid. My daughter works for them too, but she was also waitressing on the side just in case. She left her waitressing job because they lost their customers. The restaurant is 5 miles from Chrysler Headquarters and several parts suppliers.

Anyone up for another game of dominoes?????

[therealredstateblues]

Please try not to lump ford in there - they are not taking the federal aid

[illusionpainter]

I didn't say they were. I SAID THEY WILL GO DOWN TOO IF THE PARTS SUPPLIERS GO!!!!! THEY ALL USE THE SAME SUPPLIERS, DUH!!!!!

[KillTheMessenger]

If car companies don't want their suppliers to shut down, they need to pay for them to stay open. That's called "the cost of being in business". If they can't manage to do that, they have no reason to stay in business themselves. If that means cars are going to be more expensive for the consumer, than that's what it has to be.

There is no Constitutional right right to cheap oil. And there ain't no such thing to cheap cars, either.

[therealredstateblues]

there used to be something called the "economy car" these were quite popular in the 50-70s the plain jane with vinyl seats, rubber floor mats and minimal options and accessories

people could afford new cars when they could get into a base model

no one really makes such a true economy car these days - they all load them up with geegaws and gadgets

[illusionpainter]

How can they pay them when the government hasn't given them the money to do so yet? Good question Mr. Know-It-Al­l?????????

[illusionpainter]

Remember the whole bankruptcy thing? Or did you forget?

[themodernleader]

There is nothing in blowing hundreds of billions on crooked bankers. It is a mortal sin against the free enterprise system to loan 10 or 15 billion to a basic national security industry to keep tens of thousands employed. Let them go bankrupt and allow the foreign competitors to buy up the remains for pennies on the dollar.
We have treasonous leadership and everybody is quiet and subdued at the inequitable treatment and gross injustice. This is the Obama financial team policy of favoritism while risking national suicide.
There will be a point in time when these despicable employeees will be unable to show their faces in public for the damage they are compounding upon a helpless, hapless people.

[kstuff]

This is the domino effect that we were warned about...

[illusionpainter]

AMEN!!!!!

[TJCole]

Lawyers all too often really don't much about anything but lawyering.­..

How can we guarantee warranties, if we can't get parts...Mr­. President.­.?

[illusionpainter]

Exactly...­..

[therealredstateblues]

Every day here in IN, OH and MI we are seeing suppliers and tooling/equipment builders close up, ship jobs offshore, downsize or simply go out of business

plenty of help out there for wall street , main street gets the shaft,

we are watching the rapid de- industrialization of our country and yet the Obama administration is either blind to it, doesn't care or is actively promoting it - take your pick

As our industrial base erodes, so too does our wealth creation, prosperity sharing, national security providing and innovation generating engine.

As the economists line up to say we are not going to be able to borrow and spend our way out of this one, wee need to produce our way out - the Obama administration choses borrow and spend rather than support for the productive sector mfg - pretty bass-akwards way to go about it