WASHINGTON (March 19, 2009)—The U.S. Department of the Treasury is establishing an Auto Supplier Support Program to provide ailing U.S. auto parts suppliers with up to $5 billion in financing, the agency announced today.
The program is designed to offer government-backed protection to parts manufacturers, ensuring they will receive money owed them for the products they ship, no matter what happens to their customers in the auto industry, the Treasury Department said in a fact sheet.
Any domestic auto company or U.S.-based commercial supplier to a participating auto company may sign on to the program, Treasury said. Participating auto makers will request an allocation for government backing, then work with a third-party servicer to establish a receivables purchase program. In turn, the auto makers must make a financial commitment in connection with the support they receive.
The auto makers have the right to decide which suppliers and receivables receive government protection, the agency said. Suppliers interested in the program should first contact their lenders to see if they can obtain consent to sell their receivables. When they receive consent, they should contact purchasing officials at participating auto companies for approval in the program. Once in the program, they will receive protection for what Treasury called “a modest fee” and also be able to sell their receivables into the program for a small discount.
Though not a panacea, the new program is a vital first step in protecting the more than 500,000 jobs in the U.S. auto supplier sector, Treasury said. General Motors Corp. and Chrysler L.L.C. already have signed on, the agency said.