auto parts makers get $5b bailout
The Treasury Department has announced a $5 billion plan to help the troubled American people. S.
Auto parts makers, the latest attempt to stabilize China\'s troubled auto industry.
Whatever happens to their automakers customers, the plan will ensure that the parts suppliers get the money they owe their products.
Whether or not GM (Fortune 500 gm
Or Chrysler Limited may be forced into bankruptcy, which makes it difficult for component manufacturers to get the loans they need to operate.
The program also allows part manufacturers to sell accounts receivable or money owed to them by car manufacturers to the program at a modest discount.
It is expected that this will provide them with much needed funding and help to release credit more broadly in the supplier industry.
$5 billion comes from a non-performing asset rescue program set up to rescue banks and financial institutions.
A member of the Obama administration\'s automotive industry task force told reporters without using his name, he said, the decision to help suppliers should not be seen as a sign of the task force\'s decision to further support GM and Chrysler.
GM and Chrysler have received $17.
With a loan of 4 billion, they demanded a maximum of $21.
Loan increase 6 billion
The automotive task force must determine by March 31 whether the turnaround plans of the two companies allow them to be viable in the future and whether they should receive additional funding.
Members of the task force said the group would announce some news by the March 31 deadline.
But task force members say it is important to put the plan to help suppliers first, as they may run out of cash and have to stop operating GM and Chrysler help before making a decision.
\"Unlike GM and Chrysler, they haven\'t had any help from the government yet, even though they are facing some of the same problems,\" said task force members . \".
\"In the course of our work, we clearly recognize that it is very urgent to address this particular issue.
\"Even some experts who strongly advocate additional assistance to automakers agree that suppliers need to be on the front line of government help.
\"I think the most serious problem in this industry is the bottom --up failure [of a supplier]
This could put the whole industry in trouble, \"said David Cole, chairman of the Center for Automotive Research, a Michigan think tank.
But the latest TARP rescue plan has been criticized by some Republican senators.
\"While most of us on Capitol Hill are very concerned about the supplier\'s base, it violates trust and another means of this administration, this will make it difficult for them to win congressional support when they really need it, said a statement from Sen.
Bob Cork of Tennessee is one of the leading Republicans in the last December debate on whether to help the auto industry.
\"The government needs to work with Congress, not to manage the country through executive orders without checks and balances in the use of taxpayer funds.
\"He was criticized by Sen.
Earlier this year, gregd Gregg agreed to serve as Obama\'s commerce minister, but last month he changed his mind and withdrew his name.
\"Because many sectors of our economy have been hurt, I seriously question why auto parts suppliers deserve billions of dollars, especially when automakers have not made all the necessary reforms yet, to achieve long-term sustainability, \"Greg said in his statement.
\"TARP funds should be used to stabilize the financial system, not for industrial policy.
\"Only suppliers identified by major US suppliersS.
Automakers will be eligible to participate in the program.
GM and Chrysler agreed to participate in order to get help from suppliers. Ford Motor (F, Fortune 500)
No bailout has yet been received from the federal government and the company will not be involved in the plan.
If it is to do so, it must issue a government warrants for the company\'s shares and agree to some restrictions on compensation and restructuring plans.
Nevertheless, the company expressed its support for the plan in a statement.
\"These actions support all US automakers who rely on health. S.
Ford said in a statement.
\"Ford does not need to be involved in this project because we are still viable and it is not expected that there will be any problem with continuing to pay the supplier.
\"The auto parts industry is very interconnected, which means that the failure of a supplier will not only shut down the production of troubled automakers such as GM and Chrysler, it will also shut down production from Ford and overseas competitors with assembly lines in the United States.
And the suppliers are very rich.
First, uncertainty about GM and Chrysler is likely to spread across the industry.
According to GM\'s latest financial support, GM owed its suppliers $22 billion worldwide by the end of the fourth quarter.
The privately held Chrysler did not say what it owed.
Members of the task force acknowledged that this provision gave GM and Chrysler life --and-
But they have actually had that influence, he said.
He added that it is not possible for the government to be critical to which suppliers and which suppliers may be allowed to fail to classify.
\"Unfortunately, the supply base will continue to fail,\" he said . \".
\"This project cannot solve the problem of basic income or profitability.
\"Suppliers hire more American employees. S.
Workers between themabout 500,000 --
Three major economies than the United StatesS.
Car manufacturers do this directly.
As unemployment continues to hit America\'s economy as a whole. S.
Treasury Secretary Tim Geithner says this is a plan that needs to be implemented.
\"The Supplier Support Program will help stabilize a key component of the US auto industry during a difficult restructuring period in the future,\" he said in a statement . \".
The industry\'s original equipment supplier association has praised the new program.
The organization is demanding a maximum of $18.
5 billion in federal help, but Ann Wilson, the group\'s senior vice president of government affairs, called it an important stopgap.
\"This plan is a critical moment for suppliers,\" she said . \".
Both GM and Chrysler issued statements praising the supplier\'s plans.
\"This decision of the United StatesS.
The Treasury Department is seen as a vote of confidence in the United States. S.
\"The automotive industry and the future of our company,\" Chrysler said in a statement . \".
When GM and Chrysler stopped production in January due to a weak sales volume that caused a surplus in car stocks, this caused a cash crisis for parts manufacturers who rely on car manufacturers to pay for traffic.
It is expected that the industry will generally go bankrupt in the coming weeks without the help of the government.
Vishitong shares (VSTN)
Ford\'s main supplier, with reports showing little cash, fell below 10 cents this month.
In addition, the auditors of the American Axle (AXL)
It has been said that there are doubts about its ability to maintain business in the current environment.
S. axle shares rose 83% after the Treasury Department announced on Thursday, but then abandoned all of those gains to be flat.
Visteon\'s share price soared 81% in counter trading.
But it will only raise the stock price to 29 cents.
Shares in other parts manufacturers also rose sharply.
Li Er shares (
Organs, the world\'s top 500)
Took 85% shots, while the Skyteam group of the United States (
Top 500 TRW in the world)gained 36%.
Wilson agreed with the members of the automotive task force that the plan was not sufficient to prevent some suppliers from going bankrupt because almost all American automakers had announced serious cuts in productionS.
\"It won\'t stop all the bleeding.
There is no doubt, \"she said.
\"No plan put forward by the government can solve all these problems.