The Obama administration has shot down a plea by U.S. auto-parts suppliers for an additional $8 billion to $10 billion in new aid on top of a $5 billion support program put in place earlier this year, arguing that there is no further need to interfere in the industry's contraction, reports say.
President Barack Obama delivers remarks on the health care
Stating that no changes were being made to the existing $5 billion U.S. support program to guarantee the bills of key suppliers, the Treasury Department said in a statement Tuesday that the funding was playing an important role in stabilizing the nation's auto supply base. The administration will continue to monitor the situation, it added.
Neil De Koker, president and chief executive of the Original Equipment Suppliers Association (OESA), said Obama adviser Ron Bloom turned down the suppliers' request in a meeting last week saying consolidation for the industry needs to take place.
We all recognize that and we don't think that having a general program of assistance to all suppliers would help that, nor is needed at this time, Bloom and several of his staffers are reported to have said.
De Koker said the Obama adviser stated that the administration didn't feel that the prospect of more supplier bankruptcies in coming months posed a systemic threat to the auto industry. He said the administration felt that only in the case of chaos or a disorderly situation resulting in assembly-line shutdown due to lack of ability to get parts, would it take a re-look at the situation, but that at moment they believe everything is working fine.
Ann Wilson, a senior vice-president for government affairs for the Motor & Equipment Manufacturers Association (MEMA), said Obama's auto task force does not see any immediate need to provide additional liquidity to suppliers.
The OESA and MEMA were lobbying for billions in loan guarantees that they said were necessary for them to get the financing they require to keep producing parts without interruption and to help them cope with the bankruptcies of General Motors and Chrysler.
They warned 49 major suppliers would close in 2009, with another 60 likely to follow in 2010. The collapse of GM and Chrysler, along with the general slump in U.S. auto sales, has left U.S. vehicle production near an annual rate of eight million vehicles, down 32.5% from last year.
The supplier groups said while the $5 billion support program was helpful, they only directly benefited direct suppliers to the automakers, with many smaller firms needing additional money to survive.
Industry groups, such as the OESA, and company executives spent the past week presenting their case to the president's auto industry task force, as well as members of the Senate and House of Representatives.
An OESA survey in May on members' opinion of how their business outlook had changed in the past two months revealed that about 62 per cent of respondents said they were either somewhat or significantly more pessimistic.
Meanwhile, the administration's rejection has prompted U.S. senator Sherrod Brown, D-Ohio to consider introducing a legislation to provide more aid for auto-parts suppliers.
The proposed legislation, which Brown said Tuesday has the support of business, environmental and labor leaders, would aim to prevent a wave of bankruptcy filings by parts companies while helping auto suppliers and other manufacturers retool for the clean energy industry.
Though government aid and payment guarantees for GM and Chrysler have kept most suppliers afloat, nearly 20 suppliers have filed for bankruptcy this year, including Visteon Corp., Ford Motor Co.'s largest supplier, and Metaldyne Corp.