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Toyota Concerned About Parts Suppliers’ Future

Executive at Toyota says the Japanese automaker is concerned about the fate of 20 percent of its U.S. parts suppliers who face a cash crunch because of the sluggish economy.

WASHINGTON (AP) -- A top Toyota executive said Wednesday the Japanese automaker is concerned about the fate of 20 percent of its parts suppliers who face a cash crunch because of the sluggish economy.

Jim Lentz, Toyota's top U.S. executive, said he stressed the company's concerns for U.S. suppliers during a 35-minute meeting with the Obama administration's auto task force on Wednesday.

"I think the biggest challenge that we face is really on the supplier side of the business," Lentz told reporters following the meeting.

Toyota, the world's No. 1 automaker in global vehicle sales, has warned of a $3.54 billion loss for the fiscal year through March — its first annual loss since 1950 — because of the economic downturn. Lentz requested the meeting with the panel to discuss conditions of the U.S. auto industry, but said Toyota is not seeking any federal aid.

During the discussion, Lentz said a member of the task force asked, "How do we fix this?" Lentz said the industry needs an improvement in consumer confidence to drive more vehicle sales.

The Obama task force is trying to forge the restructuring of General Motors Corp. and Chrysler LLC, which have received $17.4 billion in government loans and are seeking billions more in aid.

Lentz said Toyota has concerns about 100 of its top 500 parts suppliers in March and April because many are grappling with weak revenue from lengthy shutdowns in car assembly plants throughout the industry in December and January.

Suppliers typically get paid in March for parts they ship to plants in December and January.

Of the 100 suppliers, Lentz said "there are a handful, probably 20 or 30 that we have real concerns about because of the cash flow they're about to go through."

Lentz said Toyota was developing contingency plans in the event of isolated failures in the supply base. He said there was some risk of production disruptions, "but there are ways around that risk."

Suppliers are seeking up to $25.5 billion in federal aid to domestic automakers and parts suppliers. The industry has told the Treasury Department that suppliers may see $2.4 billion in revenue in March from Detroit's carmakers, compared to about $8.4 billion in monthly revenue during the fourth quarter of last year.

Lentz said about 60 percent of Toyota's suppliers work with other manufacturers, including Detroit's automakers.

President Barack Obama's auto task force discussed the conditions of auto suppliers in a meeting last Friday of Cabinet members and members of the panel. Many parts suppliers have been struggling with the steep decline in new car sales and the cuts in production by automakers.

Dave Andrea, vice president of the Original Equipment Suppliers Association, a supplier trade group, said the "need for action is imminent." He said suppliers are seeking a "mixture of immediate liquidity by speeding payments from customers to suppliers and government guarantees to support lending into the supply base."

White House press secretary Robert Gibbs told reporters Wednesday that he did not think Obama had been "presented with specific plans yet" for the industry.

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