On the back of waning demand, the nation’s auto parts suppliers will ask President Obama’s auto task force this week to back between $8 billion and $10 billion in loan guarantees. U.S.-based car parts suppliers have already received $5 billion in federal aid, but are seeking loan guarantees to ensure production can continue uninterrupted.
U.S. car sales have dropped off 37 percent through May, but are expected to recover during the latter part of the year. However, reduced production – largely due to bankruptcies at General Motors and Chrysler – has left many suppliers low on cash, which could threaten their ability to ramp up production during the second half of the year. As such, suppliers are asking the federal government to guarantee loans in order to reduce risk and bolster lending.
“We have very good companies that can’t get financing,” Neil De Koker, president of the Original Equipment Suppliers Association, told Bloomberg. “It’s essential to provide support to suppliers in order to ensure that the money already spent on GM and Chrysler doesn’t go to waste.”
De Koker warns that failure to put loan guarantees in place could disrupt production for GM and Chrysler when they finally emerge from Chapter 11 protection.
In all, suppliers will be looking to secure between $8 billion and $10 billion in loan guarantees. Industry trade groups will meet with the President’s auto task force on Wednesday, followed by a meeting with House and Senate members later this week.
