US auto suppliers ask for cash injection

11 June 2009

12 June 2009 | Jake Kanter

Car parts suppliers in the United States are seeking $10 billion (£6 billion) in government aid to address "increasingly deteriorating" conditions in the industry's supply chain.

The Motor & Equipment Manufacturers Association (MEMA) and the Original Equipment Suppliers Association (OESA) submitted the plea to the US Treasury this week, saying suppliers' problems included access to credit, "severely" reduced vehicle production and planned summer plant shutdowns at Chrysler and GM.

The associations want to use the money to provide commercial lending and to guarantee credit insurance for vendors. The US Treasury has not responded publicly to the request.

In OESA's study of supplier financial health for May, 40 per cent of 76 vendors described their financial position as "significantly deteriorating". Some 24 per cent of the respondents had violated their bank loan agreements, while 54 per cent had been approached by sub-contractors for shorter payment terms.

A separate study by international consultancy Roland Berger predicted 49 suppliers would enter insolvency this year, with a further 60 suffering the same fate in 2010.

The aid would be in addition to the $5 billion (£3 billion) in loans handed to Detroit carmakers Chrysler and General Motors (GM) in April to either guarantee supplier payments or speed up the time taken to settle invoices (Web news, 15 April 2009).

Meanwhile, Chrysler has emerged from bankruptcy protection after signing an alliance with Fiat. A company statement said Scott Garberding would remain in charge of procurement at the newly formed Chrysler Group, while Michael Keegan has been appointed head of supply chain management.

SMjun2009

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