TPT May 2009

From the Americas

Automotive Washington moves Detroit’s auto parts makers from the radar screen into the receiving line

Days later, they did. On 19 March the Obama administration announced that it would offer as much as $5 billion in assistance to the parts manufacturers that supply the US auto industry. For companies like Visteon Corp, Lear Corp, Dana Corp, and American Axle & Manufacturing Inc – all of whose fortunes are tied to those of the producers they serve – this was good news, if long overdue. To some, it came as a last-minute reprieve. With US government efforts to aid the domestic auto industry centred on General Motors Corp and Chrysler LLC, parts makers captured the attention of Washington only comparatively recently. Even then, the interest expressed was sympathetic but somewhat academic in tone, any public discussion brief and imprecise. Only on 16 March did a top-level adviser to President Barack Obama’s automotive task force appear to take the suppliers fully into account. In an interview with the Detroit Free Press, Steven Rattner said the panel acknowledged that the suppliers had been left to fend for themselves and that their financial stress was a ‘very, very urgent’ issue. Mr Rattner was a leading candidate for ‘car czar’ in the new administration until Mr Obama decided instead to create the task force, under the Treasury secretary and a White House economic aide, to review $17.4 billion in federal loans to GM and Chrysler and their requests for billions more in aid. Suppliers had sought their own $18 billion in federal assistance through a variety of measures designed to boost short-term liquidity. The $5 billion pledged by the administration is well short of the amount requested. But it is no less welcome for that. And the suppliers can know – at least, and at last – that someone in Washington takes notice of them. › The argument for aid to the suppliers had been made often and forcibly. A week before the Freep interview with Mr Rattner, Joann Muller wrote in Forbes that a collapse of its supplier network would be just as devastating to the domestic auto industry as the failure of General Motors. She asserted outright that funnelling more money to GM and Chrysler to help them through the current downturn would be wasted unless the government also found a way to help these producers’ parts suppliers ( ‘Detroit’s other crisis,’ 9 March). As noted by Forbes, without help to the suppliers there could be a collapse of the US auto industry from the bottom, rather than from the top down. With credit markets all but frozen, bankrupt suppliers would find it hard to obtain debtor-in-possession financing to stay in business during bankruptcy reorganization. Many would be forced to liquidate. Ms Muller wrote, “That would put the car makers in a jam, because they can’t easily get the missing parts from other suppliers. It can take up to a year to shift tooling and re-certify critical components. The result, analysts say: US vehicle production would grind to a halt. Even foreign-based manufacturers operating here, like Toyota, Honda, and BMW, would be stuck, because they use many of the same US suppliers.”

In a 9 March column ( ‘There’s no time to waste in saving the auto industry’ ), an exasperated Tom Walsh wrote in the Detroit Free Press: “Sorry to be abrupt with you, exalted members of President Barack Obama’s auto task force, but there’s no time for small talk. “You people need to act quickly – like yesterday, if not sooner – to put forward a clear-cut plan. “Just get on with it, so all the suppliers, dealers, engineers, welders, bond holders, and accountants whose fates are at stake can plan accordingly. “This industry, the Detroit region, and the people in it are so spooked right now that they are almost past caring about exactly what you plan to do – whether it’s to keep federal loans flowing, force General Motors and Chrysler into bankruptcy, merge them, or even nationalize the auto industry. “Just get on with it.”

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