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Suppliers request $20.5 billion in U.S. emergency aid

Suppliers request $20.5 billion in U.S. emergency aid

David Barkholz
and Robert Sherefkin

Automotive News | February 4, 2009 – 3:24 pm EST


U.S. auto parts suppliers are asking for up to $20.5 billion in federal aid to survive the worst industry downturn in decades.

Suppliers are requesting $10 billion in direct loans from the Treasury Department, said Neil De Koker, president of the Original Equipment Suppliers Association in suburban Detroit.

They also are asking for an additional $10.5 billion that will flow through the Detroit 3 so that suppliers can be paid in 10 days for parts delivered instead of the traditional 45.

Suppliers are starving for cash as they confront first-quarter North American production cuts of more than 40 percent and a 66 percent plunge in January. De Koker estimates that hundreds of parts makers will close or file for Chapter 11 protection without immediate aid.

The federal government already has pledged $24.9 billion to General Motors, Chrysler LLC and their captive finance companies; earmarked another $25 billion for supplier and automaker plant retooling; and committed funding to free up credit for consumer loans, including those to vehicle buyers.

The suppliers made the Treasury request through the Motor & Equipment Manufacturers Association, De Koker said. The request was delivered to Treasury officials Sunday, Feb. 1, he said.

Need ‘fast pay’ assistance

For the direct loans, suppliers individually will have to apply for the money. But the association wanted to give Treasury some sense of how much money will be needed for suppliers, De Koker said.

The $10.5 billion “fast pay” part of the request will help suppliers bridge what they typically receive for parts delivered and the shortfall caused by production cuts, De Koker said.

The Detroit 3 typically spend about $15 billion a month for parts, he said. That figure will be more akin to $5 billion to $7 billion a month in February and March, he said.

U.S. auto sales fell 37.1 percent to 656,881 units in January, the lowest total for any month since 1981.

The request for the $10.5 billion portion was reported earlier by Bloomberg News.

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