US Auto Suppliers Seek $25.5Bn In Federal Aid

DETROIT -(Dow Jones)- U.S. auto suppliers are seeking $25.5 billion in federal aid as falling sales and production cuts push more towards the brink of bankruptcy.
Suppliers have been pressing their case with the U.S. Treasury in recent weeks in the wake of the nearly $22 billion in aid already granted to General Motors Corp. (GM), Chrysler LLC (C.XX) and their finance arms.
The 11-page request, representing 400 suppliers, was submitted to the Treasury this week by the Motor & Equipment Manufacturers Association, or MEMA. The association declined comment.
"Without immediate assistance to suppliers, the country will face massive job losses and the eventual breakdown of the entire automotive sector in the United States," according to a copy obtained by Dow Jones Newswires.
Suppliers account for more than three-quarters of auto sector employment in the U.S., according to a Chicago Federal Reserve study, with staffing estimated at around 600,000 across the industry.
The suppliers want $7 billion to create a "quick pay program" in which auto makers could pay suppliers within 10 days of receiving product instead of the traditional 45-55 days.
A survey of suppliers by the Original Equipment Manufacturers' Association last month said average accounts receivable widened to 51 days in January.
Suppliers are also seeking $10.5 billion to guarantee receivables of suppliers whose customers have received federal loans, including GM and Chrysler.
A guarantee would allow for a pool of federal funds to provide a backstop for commercial lending losses on loans to suppliers.
U.S. light-vehicle sales fell to an annualized 9.57 million in January, and some OEMA members warn they could fall as low as 7 million if the recession persists, though most industry estimates are around 10 million.
OEMA members are working at 60% utilization rates, according to the January survey.
"More than 40 major suppliers filed for Chapter 11 restructuring in 2008, and industry surveys indicate that approximately one-third of all suppliers are in imminent financial distress, with another one-third indicating that they will be in distress during the first quarter of 2009," according to the request.
"Without immediate assistance to suppliers, the country will be faced with faltering vehicle manufacturers, massive job losses and the eventual breakdown of this country's largest manufacturing sector."
A further $8 billion is being sought in direct access to federal loans.
A major bankruptcy by a supplier could force the closure of automotive assembly plants across the country since many parts arrive at assembly plants just hours before they are needed on the assembly line.
Such companies as American Axle & Manufacturing Holdings Corp. (AXL), ArvinMeritor Inc. (ARM), Lear Corp. (LEA) and Visteon Corp. (VC) have taken major financial hits as auto makers cut production in the wake of slumping sales both here and around the world.
Most of those production cuts were made with little warning, intensifying the financial pressure as suppliers scramble to cut workers and stop lines.