Auto Suppliers Chase Their Own Bailout
A few weeks ago, we ran a piece pointing out the disastrous trickle-down effect that the auto industry’s troubles have had on the companies that supply them with parts.
Today, The Washington Post reports that those auto-parts makers are now seeking their own federal bailout. From The Post:
Industry members have been discussing several options with the Treasury Department and lawmakers, weighing whether to seek funds from the financial rescue package, the stimulus plan or other sources, according to Ann Wilson, senior vice president of government affairs for the Motor & Equipment Manufacturers Association.
Suppliers hope to present a request by March 1 to avert a string of bankruptcies in their sector, said Wilson, who yesterday met with more than a dozen chief executives and chief financial officers to discuss their options.
The Post goes on to say that the auto-parts industry would prefer an agreement in which Washington simply offers more cash to Detroit’s automakers to pay the suppliers more quickly. Last month, the Bush administration agreed to grant more than $17 billion of Wall Street bailout funds to keep Chrysler and General Motors alive through March.
Detroit’s automakers currently owe suppliers about $13 billion to $15 billion a month for parts delivered in the previous 45 days. The delay gives automakers time to sell vehicles and use the proceeds to pay back their debts.
Suppliers, which are in desperate need of fast cash, want that lag reduced from 45 days to 10 days.
Still, many auto-part suppliers cater not only to Detroit’s Big Three, but to the foreign transplants as well. Those foreign companies haven’t received any bailout funding, but nor are they selling many cars in a market with fewer and fewer customers. Indeed, Toyota announced this week that it expects sales to be down 20 percent this year.
What remains unclear is how exactly more federal money for the Big Three is supposed to help the many American suppliers catering to Toyota, Nissan and Honda.