Although the Bush Administration announced a bailout package for the Detroit automakers earlier on Friday, not all in the auto community are satisfied. Automotive suppliers are now saying that they are in desperate need of government funding, with many claiming to be on the brink of collapse.
Some of the $17.4 billion set aside for Chrysler and General Motors will undoubtedly end up in suppliers’ pockets, but suppliers are saying that just isn’t enough. “The next critical phase is the supplier community, which is facing the exact same financial crisis as the manufacturers,” Neil DeKoker, CEO of the Original Equipment Suppliers Association, told Automotive News. “We’re requesting assistance from the presidential transition team.”
The biggest complaint by automotive suppliers is that they just don’t have the same access to capital they once did. Suppliers traditionally use their accounts receivables from automakers as collateral against working capital, but with the poor state of the Detroit automakers, banks are no longer accept AR as a form of collateral.
Suppliers are also feeling the collapse of the new car market as most automakers – including Chrysler , Ford , General Motors, Toyota and Honda – are cutting back production.
But even if there is a desperate need for a supplier bailout, there likely isn’t enough support in Washington to get a deal hammered out. The Big Three had a tough enough time convincing the government to fund a bailout package, some of which will eventually wind up on the supplier level. All in all, it looks like tough times are ahead for the country’s auto suppliers.
