In its ongoing efforts to stabilise the American auto industry, the U.S. Department of Treasury announced on March 19, 2009 that as much as $5 billion would be doled out to parts suppliers directly linked to the threatened collapse of General Motors and Chrysler. Using money drawn from the Troubled Assets Relief Program (TARP), a line of revolving credit will be established to finance auto parts that suppliers have already shipped to the Big Three, but for which they have received no payment.
General Motors, Chrysler, and Ford will have the option of using the
federal aid for auto parts suppliers program, paying a five percent fee of up to $250 million for the privilege. The auto manufacturers would designate which parts suppliers were in need of financing and the suppliers would have to agree to government terms as well as pay a small fee. The assistance program comes in the wake of $17.4 billion in government loans to GM and Chrysler. Currently Ford is operating without federal aid and has already said it would not choose to take part in the supply credit line because the company "remain[s] viable and expect[s] no issue with continued payments to our suppliers."
Members of President Barack Obama's auto task force, speaking off the record to the press, have indicated that the financing program is the first step in an actual restructuring of the auto industry. A plan for this broader government-directed action will be laid out by the task force by March 31 when the panel has completed a review of the future viability plans presented to the body earlier this month by GM and Chrysler. In a statement about the aid package to suppliers, Treasury Secretary Timothy Geithner said, "The program will provide supply companies with much needed access to liquidity to assist them in meeting payrolls and covering their expenses, while giving the domestic auto companies reliable access to the parts they need."
Last month, in an appearance on the NBC Sunday news program "Meet the Press," White House adviser David Axelrod said, "We need an auto industry in this country. There are millions of lives, livelihoods that depend on it. We have a real interest in seeing the auto industry survive, but it's going to require a major restructuring of the auto industry." The latest federal aid package would seem to indicate that the Obama administration is on course in its moves to support the American automotive industry and to hopefully move it in a better and more solvent direction.
Seah H. - 9 Apr 2009