White House approves $17.4 billion loan to automakers
Auto suppliers are still looking for financial help, though
By Tom Stundza -- Purchasing, 12/19/2008 4:04:00 PM
President Bush this morning announced that U.S. automakers General Motors and Chrysler will get $13.4 billion in loans from the Troubled Assets Relief Program, or TARP. Another $4 billion in TARP loans is possible if the automakers show they are viable. TARP is the $700 billion fund that was set aside in October to bail out Wall Street firms and banks. The president said that if the firms have not attained viability by March 31, 2009, the loan will be called and all funds returned to the Treasury.
“This is good first step in helping the auto industry,” says Neil De Koker, CEO of the Original Equipment Suppliers Association in Troy, Mich., “but more needs to be done in Washington to help the automakers’ suppliers, who also are struggling to obtain financing from the banking industry.” De Koker says in an interview with Purchasing.com that “intense lobbying with the current administration still hasn’t gotten credit or working capital commitments from Treasury or the White House for the supply base to the automakers.”
During brief remarks at the White House, President Bush said “government has a responsibility to safeguard the broader health and stability of our economy. If we were to allow the free market to take its course now, it would almost certainly lead to disorderly bankruptcy and liquidation for the automakers." He added that “in the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action.” All of the major automakers, including transplants Toyota Motor and Honda Motor, are cutting back on production. GM and Chrysler, however, have announced shutdowns of assembly lines for at least a month, several weeks longer than the typical shutdowns during the December holiday season.
Trade groups representing auto suppliers and lawmakers from both parties have expressed frustration with the way Treasury Secretary Henry Paulson has navigated the financial crisis. Adding his voice to the frustrated, De Koker says in this interview with Purchasing.com that the OESA is working with the transition team of President-elect Barack Obama. “We are explaining the severity of the problems inside the auto industry’s supply base, many companies, which also are manufacturers. We have literally thousands of these companies that are owed billions of dollars for parts and materials—and with some on the verge of collapse because they can’t get the working capital or credit to keep them viable while the automakers reorganize their operations.”
Now Playing:
Distributors adapt to auto industry changes
07/22/20099/11-2008
09/11/2008Suppliers tighten their own supply bases
10/05/2006Federal-Mogul may make a bid for Delphi
07/07/2009Business as usual for Delphi purchasing
10/10/2005
