U.S. Rejects Auto Supplier Aid Request

Obama administration has turned down request by auto suppliers for up to $10 billion in additional federal aid to help parts companies deal with GM and Chrysler bankruptcies.

WASHINGTON (AP) -- The Obama administration has turned down a request by auto suppliers for up to $10 billion in additional federal aid to help the parts companies deal with the bankruptcies of General Motors and Chrysler.

The Treasury Department said in a statement Tuesday that an existing $5 billion support program for auto parts suppliers was playing an important role in stabilizing the nation's auto supply base. "No changes have been made to funding, but we will continue to monitor the situation," the department said.

Suppliers have lobbied for $8 billion to $10 billion in loan guarantees to help them raise money to buy raw materials and pay employees as Chrysler and GM resume production.

Supplier trade groups met with members of the Obama administration's auto task force and lawmakers last week.

Task force officials told industry leaders they already had provided plenty of support but did not see a need for further action, said Neil De Koker, president and chief executive of the Original Equipment Suppliers Association.

"They basically said, 'You know things are smooth right now; we don't see disruption in the industry; assembly lines aren't being shut down because of part shortages,'" De Koker said. "They left the door open."

Obama's task force created a $5 billion financing support program in April to keep parts flowing for General Motors Corp. and Chrysler Group LLC. It also provided government guarantees to finance parts that were already shipped to automakers but had not been paid for.

GM and Chrysler have participated in the program, which allows the car companies to choose how the aid is distributed among the suppliers.

Hundreds of suppliers of all sizes manufacture bolts, axles, transmissions and other parts for assembly in car plants. Suppliers have been hurt by the dramatic downturn in auto sales, and some analysts have been concerned the supply chain could collapse. Government aid and payment guarantees for GM and Chrysler have kept most suppliers afloat.

About 20 suppliers have filed for bankruptcy this year, including Visteon Corp., Ford Motor Co.'s largest supplier, and Metaldyne Corp.

GM and Chrysler, which are both working through bankruptcy filings, are temporarily shutting down some factories for up to three months because of growing inventories.

If the plants are not running, suppliers have no income and must deal with a 45-day lag between when they ship parts and when they are paid again. The potential cash crunch has prompted industry groups to seek additional federal support.

De Koker said some suppliers could be forced to shut down or liquidate due to a lack of cash, and others may be unable to provide parts once automakers resume production.

"The entire industry is running at such low capacity that when the plants start ramping up again the cash won't be there to pay for parts and labor," he said. "If we don't find some way to get credit to suppliers, there are going to be suppliers who just can't make it."

Lawmakers from auto states are seeking other ways to help supplier companies. Democratic Sen. Sherrod Brown was expected to announce a plan on Wednesday to provide a new funding source to help small and midsize auto suppliers revamp their facilities to create clean energy jobs.

"We'll have to follow through and see what other options are available, but I think it's very important that we do everything we can to help suppliers," said Sen. Debbie Stabenow, also a Democrat, who represents Michigan, the homeland of the U.S. auto industry.

AP Business Writer Chip Cutter contributed to this report from New York.

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