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Suppliers ask $10 Billion More in Taxpayer Funds

Trade groups make another request to the U.S. Treasury, citing "immediate threats" to industry and vehicle manufacturing.

by on Jun.16, 2009

President of E&E Manufacturing, Wes Smith, testifying before the House Small Business Committee at a hearing examining the impact of the auto crisis on small suppliers.

The president of E&E Manufacturing, Wes Smith, explains to the House Small Business Committee the negative effects of the crisis on small suppliers.

The Original Equipment Suppliers Association (OESA) has submitted a plan to the U.S. Department of the Treasury that outlines “immediate actions” needed to stabilize the increasingly deteriorating situation in the country’s auto supply base. OESA points to 49 supplier insolvencies in 2009, and predicts an additional 60 supplier insolvencies in 2010 if the current situation prevails.

“The supplier industry is witnessing a very rapid and dangerous decline,” said Neil De Koker, OESA president. “Further losses would exacerbate the devastation within the supplier industry, threaten the ability to support a domestic vehicle manufacturing industry, and worsen the economic conditions in communities across the country.”

The trade group cites a continued lack of available credit, severely reduced vehicle production levels, and planned summer shutdowns by GM and Chrysler as all worsening the financial state of the fragile supplier industry.

Small suppliers, suppliers manufacturing in the U.S. and shipping to Canada and Mexico, and suppliers directly providing replacement and warranty parts and tooling are among the companies that have found themselves without access to capital during the ongoing credit crunch.

It is not immediately clear how much more support for the auto industry will be forthcoming from the Treasury after its huge bailouts of Chrysler and General Motors, although there is a rational for this politically unpopular option to protect taxpayer investments in both companies. Most suppliers have plans to downsize and move existing jobs offshore as unemployment in the U.S. continues to increase. (more…)