U.S. Auto Suppliers Ask Treasury for $25.5 Billion Bailout

The Motor & Equipment Manufacturers Association and its affiliate the Original Equipment Suppliers Association, which represents more than 400 member companies with global automotive sales exceeding $300 billion, have asked the Treasury Department for up to $25.5 billion in emergency aid.

The request came days before General Motors and Chrysler are required to present long-term viability plans to the Treasury to prove they will be able to repay $13.4 billion in loans.

The supplier organizations warned in their submission that as many as one million jobs could be lost should the supplier base not be supported. Some 40 major suppliers filed for bankruptcy protection last year and scores more are at risk of collapse.

"The dramatic downward spiral that the supplier community witnessed in the last few months necessitates immediate action from the Treasury Department," said Bob McKenna, CEO of the Motor & Equipment Manufacturers Association. "We are not seeking blanket protection from natural consolidation, but need temporary relief to sustain the very foundation of the domestic auto industry and a critical sector of the nation's economy."

A third of suppliers said in a recent survey that they are "in imminent financial distress" while another third said they will be in distress during the first quarter of 2009, the groups said.

"The magnitude of the problems facing suppliers has yet to be deeply felt, and I hope we do not reach that point," McKenna said. "Without appropriate action, automotive suppliers will be unable to return to required operations in March and April without shuttering facilities or closing entire companies. This would devastate the domestic auto industry and deepen the economic crisis."

The suppliers asked for federal aid to be directed in three ways:

$10.5 billion in government guarantees of supplier receivables from GM, Ford, and Chrysler so suppliers can use their receivables as loan collateral with traditional lenders
$8 billion in government guarantees of commercial loans for supplier companies
$7 billion for the institution of a "quick pay" receivables program to increase supplier liquidity by accelerating accounts payable payments from GM and Chrysler to their suppliers.