Car part suppliers warn of collapseshttp://www.ft.com/cms/s/0/eb494ec4-f3df-11dd-9c4b-0000779fd2ac,dwp_uuid=a4
By John Reed in Detroit
Published: February 6 2009 01:04
Automotive parts suppliers on Thursday warned of a wave of bankruptcies
that “will be disruptive to every automaker worldwide” as they stepped
up their call for a US government bail-out.
Many parts suppliers have been brought to the brink of failure by
collapsing car sales and the shutdown of most of America’s car plants in
December and January. The industry is warning of a cash crunch from March 1
and seeking $25.5bn (€20bn, £17.4bn) of emergency aid, outlined in
working documents submitted this week to the US Treasury.
“Suppliers now face unprecedented challenges that have created a crisis
in our industry with consequences for the nation’s economy as a whole,”
said Bob McKenna, head of the Motor & Equipment Manufacturers Association,
which represents US suppliers.
The association said it had had “constructive conversations” with the
Treasury, but no formal request had been submitted.
Suppliers say they need $10.5bn of federal loan guarantees for their
accounts receivable from General Motors, Ford Motor, and Chrysler, which
banks are no longer accepting as collateral. The industry also wants direct
loans of $8bn from federal troubled asset funds, and $7bn to create a
“quick pay” scheme to speed up their reimbursement for parts.
“The significant drop-off of accounts receivable in March is not just a
one-month issue, but will be an ongoing issue,” said David Andrea,
vice-president of industry analysis and economics with the Original
Equipment Suppliers Association, which represents companies accounting for
about two-thirds of North American supplier sales.
US car sales fell to an annual level of less than 10m in January, compared
with more than 13m last year and 16m in 2007.
The suppliers’ call for help is a further sign that the crisis at
America’s carmakers is squeezing their business partners. Dealership
groups are seeking $10bn of federal funds to help keep them afloat.
The suppliers’ request for federal aid exceeds the $17.4bn extended to GM
and Chrysler. Some in Washington are sceptical about the likelihood of the
industry securing its own bail-out.