Bailout virus spreads, auto part suppliers seek $18.5 billion

14 February 2009

The US motor vehicle parts supplier groups have submitted a formal request to the US Department of the Treasury seeking financial assistance of $18.5 billion as approx one-third of all suppliers are in imminent financial distress, which could possibly lead to one million workers losing their jobs.

Two industry groups representing US auto suppliers have made three proposals to alleviate their dire financial straits.

The three proposals are:

Government guarantee of supplier receivables from GM, Ford, and Chrysler so that suppliers are able to use their receivables as loan collateral with traditional lenders;

Institution of a "quick pay" receivables programme to increase supplier liquidity by accelerating accounts payable payments from GM and Chrysler to their suppliers; and
 
Government guarantees of commercial loans for supplier companies.

The request by the group comprises of federal guarantees of commercial loans and credit as well as collateral based on receivables.