U.S. Treasury Said to Work on Aid for Auto Suppliers

The Obama administration is looking for a way to prop up struggling auto-parts suppliers, possibly through a lending facility to centralize aid to hundreds of companies, a person familiar with the matter said.

Finding a mechanism to offer assistance is pivotal, because there are so many partsmakers it would be difficult for the Treasury to administer loans directly, said the person, who asked not to be identified because the planning is private.

Help for unprofitable suppliers would widen the government’s role in the auto industry after lending $17.4 billion to General Motors Corp. and Chrysler LLC. Automaker purchasing chiefs met with President Barack Obama’s auto task force Feb. 23 to discuss how to prevent partsmaker failures, people briefed on the session have said.

“They’re very actively looking at the issues and they’re very aware of the urgency of the matter,” said Neil De Koker, president of the Original Equipment Suppliers Association trade group, in an interview yesterday.

Suppliers such as Visteon Corp., Lear Corp. and Tenneco Inc. have said they support a U.S. aid effort. An administration official said the Treasury, which is running Obama’s auto industry assistance efforts, hasn’t made any decisions about the partsmakers.

“A number of options” are being studied, said De Koker, who wouldn’t give details. The group, which represents more than 400 companies, also met with the task force on Feb. 23, he said.

Aid Request

De Koker’s trade group and the Motor & Equipment Manufacturers Association requested about $18.5 billion in aid from the Treasury Department on Feb. 13, four days before GM and Chrysler asked for as much as $16.6 billion more in loans.

Without federal assistance, a wave of bankruptcies would force some suppliers to close and damage a U.S. auto industry struggling with the worst domestic sales since the early 1980s, according to the groups.

De Koker said his trade group told the task force of the urgency of suppliers’ financial needs, because extended production shutdowns in December and January by GM, Chrysler and Ford Motor Co. have left the partsmakers with a dearth of sales.

As many as one-third of the more than 4,000 U.S. auto suppliers face “imminent financial distress,” De Koker’s group has said. Many are closely held companies with less revenue than the publicly traded partsmakers, the association has said.

The Feb. 13 proposal from the supplier groups asks the government to back payments promised by GM, Ford and Chrysler so partsmakers can use the so-called receivables as loan collateral. The plan also seeks funding so automakers can pay suppliers faster, as well as a government guarantee of commercial loans for the parts companies.

The Treasury announced guidelines on Dec. 31 for aid to the auto industry that would let officials provide funds to any company they deem important to making or financing cars. That broadened access to the Troubled Asset Relief Program beyond loans previously approved for GM, Chrysler and lender GMAC LLC.

Slumping sales have dragged many of the biggest U.S. partsmakers to losses and caused some to breach their loan covenants or put them at risk of doing so.

Visteon said this week it may not be able to stay in compliance with its credit terms and may need to renegotiate, Tenneco amended a covenant at a higher interest rate, and Lear is renegotiating debt agreements after falling out of compliance.