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]