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Registration date : 2009-02-06

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PostSubject: Supplier group: Need is urgent for federal help   Supplier group: Need is urgent for federal help Icon_minitimeSun Feb 08, 2009 2:28 am

Supplier group: Need is urgent for federal help

Harry Stoffer
and Robert Sherefkin
Automotive News
February 7, 2009 - 12:01 am ET

The nation's automotive supply base will last only a few weeks unless the federal government provides "a significant amount of money," says Ann Wilson, the suppliers' top Washington lobbyist.

Suppliers are talking with the U.S. Treasury Department and Congress about the urgent need for aid but have not made a specific, formal request, said Wilson, senior vice president for governmental affairs at the Motor & Equipment Manufacturers Association.

Neil De Koker, CEO of the Original Equipment Suppliers Association, calculated the need for aid at about $18.5 billion. He called that a "discussion figure" used when the associations made an 11-page presentation to Treasury last week.

Suppliers have suggested three ways for the government to help.

One is to provide General Motors and Chrysler LLC extra federal loan money so they can pay suppliers earlier than normal. A second is to guarantee payments due suppliers from the Detroit 3 so the parts makers can use the guarantees to get new bank loans. The third way is to give direct loans to suppliers from the $700 billion originally set aside to rescue financial institutions, a program commonly called TARP.

The Treasury Department has committed $24.9 billion from TARP to help GM, Chrysler and their captive finance companies weather the worst industry downturn in more than a quarter-century.

Some reports have placed the supplier need at more than $25 billion.

Wilson cautioned against adding up the various options that supplier industry leaders have suggested. The government could do one of the options, some combination or variation of the options or nothing at all.

But she emphasized, "We have three weeks" before disruptions in the supply chain could occur. Companies are getting about a quarter of the revenues they normally would because so many assembly plants were slowed or closed in late 2008.

Now suppliers face first-quarter production cuts of more than 40 percent.

De Koker estimates that without federal help, hundreds of parts manufacturers could be shuttered or seek Chapter 11 reorganization with little chance of financing.
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