U.S. to Provide $5 Billion in Aid to Auto-Parts Suppliers - WSJ.com

Here is a novel idea!!!

Why not have the automakers use some of the BILLIONS they received in bailout money and just pay their bills. Then we would not have to give the parts guys money! Does this only make sense to me????


WASHINGTON -- The Obama administration plans to provide up to $5 billion in assistance to the country's beleaguered auto-parts suppliers, many of which are teetering on the edge of bankruptcy.

The program would pump money into dozens of the country's biggest suppliers to help cover the cost of seats, axles and other components shipped to the Big Three auto makers but not yet paid for.

The program will give "suppliers the confidence they need to continue shipping parts, pay their employees and continue their operations," the Treasury said in a statement.

The statement said the program will provide suppliers access to government-backed protection that money owed to them for the products they ship will be paid no matter what happens to the recipient car company. It also will allow suppliers to sell their receivables into the program at a modest discount.

"This will provide suppliers with desperately needed funding to operate their businesses and help unlock credit more broadly in the supplier industry," the Treasury said.

Hundreds of suppliers have been struggling to keep going as car sales have plunged and bills for earlier shipments have gone unpaid. The car makers and President Barack Obama's auto task force have both warned in recent days that a chain reaction of bankruptcies within the suppliers sector would cause havoc in industry.

The suppliers last month offered a proposal to the Treasury with three options for various financing facilities. All told, the plan called for about $25 billion in lending and other assistance.

Several U.S. auto suppliers are hanging on the edge of bankruptcy filings due to concerns over liquidity and fears that they will no longer be considered "going concerns" by accountants. Major suppliers, including Lear Corp. and American Axle, have issued warnings concerning their going-concern status, and Lear said Tuesday it received 60-day waivers from its banks, meaning these lenders will not push them into default.
The number of auto-parts makers has dwindled for years, but some now fear the industry, which accounts for hundreds of billions of dollars of revenue and hundreds of thousands of jobs, may be headed for liquidations as auto production shrinks amid the global economic slump.

The Bush administration injected capital into General Motors Corp. and Chrysler LLC to avert the potential chaos of bankruptcy filings. But that didn't address overcapacity in the auto-parts industry. Obama administration officials are calling for a more comprehensive aid package for Detroit that requires big changes across the industry.

Increasingly, lenders are refusing to extend credit to parts makers that do lots of business with GM, Ford Motor Co. or Chrysler. The auto makers themselves can't afford to rescue even their most vital suppliers.