DETROIT (Feb. 2, 2009) — Parts suppliers this week plan to request federal Treasury Department loans of up to $10 billion to try to avert hundreds of bankruptcies and possible liquidations, a supplier association chief said.
The suppliers will ask that the loans be funneled through the Detroit 3 so suppliers can be paid in 10 days for parts delivered, instead of the usual 45 days, said Neil De Koker, president of the Original Equipment Suppliers Association in suburban Detroit.
The group also will ask Treasury to guarantee certain supplier receivables so parts makers can use the owed money to borrow needed working capital, De Koker said.
Suppliers are facing the worst February and March paydays in decades because of auto production cuts. Without federal help, hundreds of suppliers might close or be forced into Chapter 11 reorganization, De Koker said.
At a meeting of 35 supplier executives last week, the association decided to make priorities of "quick pay" and receivable guarantees.
Those two options were deemed the fastest way to get cash to suppliers because General Motors Corp. and Chrysler L.L.C. already have received Treasury loans and have an approved process to borrow the money, De Koker said.
At the meeting, the executives discarded the idea of having individual suppliers ask directly for loans, De Koker said. That would require the creation of a whole new set of borrowing provisions.