U.S. Treasury unveils $5B Supplier Support Program
As difficult as it was for General Motors and Chrysler to secure emergency loans from the government, the supplier community that supports the auto industry has found it even more so. Until today. This morning, the Obama administration announced its Supplier Support Program, which creates a $5 billion fund to help keep payments flowing through automakers to the suppliers they work with.
The details of the Supplier Support Program are particularly interesting, so pay attention. According to the Detroit Free Press, GM and Chrysler have already agreed to take part in the program, but Ford, which has been the only U.S. automaker not to accept federal assistance, has yet to decide. It appears that the $5 billion fund will be paid for mostly by the government, but GM and Chrysler have reportedly contributed undisclosed amounts to it already, which is fair, we suppose, considering the fund goes towards paying their bills.
The money will be flowing through automakers to their suppliers, so the automakers ultimately decide which suppliers will continue to get paid and which won't. As such, the program won't benefit all suppliers. Those who do finally get that check in the mail should find credit easier to secure, as lenders will know a steady stream of payments to the company are guaranteed. Lastly, the program's guarantee of payment only applies to parts produced after today and only "U.S.-based" suppliers and automakers can participate.
The entire U.S. automotive supplier community has been operating on the brink along with General Motors and Chrysler, but until today was paid little attention by the U.S. Treasury. The Supplier Support Program will at least ensure that the complex process by which automotive components are produced, delivered and paid for continues without interruption, even if that means not every supplier survives.
[Source: The Detroit Free Press]
Reader Comments (Page 1 of 1)
jamie 3:16PM (3/19/2009)
I think Ford is slinking under the radar here.
Ford receives the benefits of no supplier disruptions with absolutely no commitment required. Technically some of those suppliers that GM and Chrysler use also support Ford...Toyota, Honda and a few others.
Seems awfully short sighted to force GM and Chrysler to help foot the bill, while letting the others go Scot free.
Reply
sunz 3:24PM (3/19/2009)
I do not know that i agree with you on that. GM and Chrysler are reaping benefits that Ford is not going to reap for not participating. Basically they are having their bills subsidized. The government is basically saying "ok .. you will owe 50million and we will pay 40 million but you have to pay the last 10 million." So for 10 million they are getting 50 million in products and services. Ford on the other hand will have to pay their 50 Million for the same services.
-sun
Reply
Rich 3:43PM (3/19/2009)
Can't you two just get along?
why not the LS2LS7? 4:46PM (3/19/2009)
I don't think it's really a subsidy of the costs. It's more of a guarantee of creditworthiness. If you've ever dealt with supply chains, you know that if you cannot trust your suppliers (and vice-versa), it becomes difficult to do business. The supplier cannot afford to buy parts to make what he wants to supply if he doesn't know the customer will have the money to buy them. And a similar situation exists in the opposite direction. It becomes like one of those spy swaps on a bridge in Germany as to who is going to hand over the money or goods first.
A system of guarantees will make sure this doesn't happen and will only cost money when suppliers or buyers actually fail. So it could be a good investment, depending on how it turns out.
BigWill 7:24PM (3/19/2009)
Not quite true. Ford (and Nissan and Hyundai) get Visteon bailed out indirectly through GM and Chrysler's bailout money. Ford's upside is that it doesn't have to dance to the tune of the government puppetmasters which, if you look at what political correctness is doing to GM, is a really good thing for Ford.
Smegley 3:35PM (3/19/2009)
I feel really good about this because Barky Obama said he's going to put in Big Scary Joe Biden in charge of making sure every dime of all government moneys for this crap is well spent and "no one messes with Joe" and we all know how well that worked out. At least this is a Treasury plan and heck - when a department that no one wants to work for and that is run by an incompetent elf doles out the funds, well you know it's well thought out.
Wake me up in 3 years 8 months please.
Reply
Ligor 4:57PM (3/19/2009)
oh you mean like waht Bush did with the first 350billion to the banks
everywhere else in the world the gov'ts have stepped up and helped their country, only in the US do you give a 700billion loan with no questions, and then try to catch the little guys that's only asking for $25billion
I think Bush should be held responsible for ignoring the econommic issues
ryan 3:48PM (3/19/2009)
Us Americans need to understand a few something(s) about our new administration:
Obama is not working for us the people, he is a puppet of the wall street crowd.
The federal reserve is ABOVE the law of the land-they can do whatever they please.
We have been lied to time and time again. When the hell are we the people going to say, "enough is enough?"
Asides from these things, creating more debt is not going to save this country. Everything happening now has been carefully planned for a long time.
Reply
John 4:09PM (3/19/2009)
Since Obama entered office, the government has spent and average of $1 billion dollars per hour. That puts us on pace for over $8 trillion dollars spent this year. This spending insanity is absolutely unsustainable.
This country will be in debt for decades.
Slizzo 4:40PM (3/19/2009)
@ John
In case you didn't realize, the country has been in debt since I've been alive, and longer (I'm 27 years old).
And I agree, spending is out of control, but if the parts suppliers don't get any cash and go under, how are the big three (and the rest of the manufacturers of the world that have factories here) supposed to build vehicles without the components to even get them off the line?
John 7:55PM (3/19/2009)
"In case you didn't realize, the country has been in debt since I've been alive, and longer (I'm 27 years old)."
Incorrect. Clinton generated a surplus for several years in the 90's. All that went out the window with 9/11, the wars, and now the financial meltdown. The government trying to spend our way into prosperity has never worked in the past and will not work now.
Ligor 5:01PM (3/19/2009)
oh come now
you all are so short sighted - Obama foudn the economy in ruins (due to your Bush) adn now you try to blame him for trying to get this country out of the recession.
maybe he should just let it go as Bush did and the whole world will then have to face the biggest depression ever (cause I can guarantee you it will be worse that 1932, since at that point in time people were not used to much luxury and the laziness that's plagued American in this last few decades)
you all need to go out of this country once in a while ans see the world. it'll open your eyes to what the Bush administration managed to do.
Reply
Aarti 4:49AM (3/20/2009)
If think, Audi often finds itself in the shadows of Mercedes and BMW, but it emerges from the shadows when it comes to getting tickets. http://www.localcarsnow.com
Reply
darongifford 1:59PM (3/20/2009)
at 5% charge for the receivables being factored, and 2% for the credit insurance...no supplier can afford this for very long. that would eat up much of their profit margin even in normal volumes
Reply