American car parts suppliers were given a guaranteed $5bn in federal financing by the US Treasury's car taskforce on the 19th March, in a deal that protects the core of the industry but could spell the end for weaker companies.
The Financial Times reports that the loan guarantee package is much smaller than car parts suppliers requested but was broadly welcomed by the automotive industry and investors. Shares in large car parts suppliers rose sharply.
"The programme 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," said Tim Geithner, the Treasury -secretary.
Car Parts Suppliers had asked for $10.5bn of federal loan guarantees to back their accounts receivable from the "Detroit 3", General Motors, Ford Motor and Chrysler, which were no longer being accepted by banks as collateral for new loans.
The car parts suppliers submission to the Treasury included a request for government loan guarantees worth $8bn and $7bn to create a "quick pay" scheme.
Under the support plan outlined yesterday, which applies only to American companies, suppliers will be able to get government-backed credit insurance for money owed by General Motors ( Vauxhall in the UK) and Chrysler. They will also be able to sell receivables to the scheme for cash at a "modest discount".
General Motors and Chrysler will choose which car parts suppliers are eligible for the scheme. Ford has the option of participating. Car makers are expecting a flood of suppliers to lobby to be included in the scheme.
Report compiled by Find-a-Part Car Parts Search Specialists since 1978.
