By Neil Roland, Automotive News
Detroit, Michigan --- General Motors and Chrysler Group say that about 430 of their direct suppliers, or about a quarter of their Tier 1 base, have gotten aid under the $5000 million federal supplier programme.
The disclosures, in response to questions from Automotive News, did not include details about which suppliers received aid. But the new information prompted criticism of the three-month-old programme by analysts, who said it was inadequate.
Analysts called for an expansion of US assistance at every step of the supply chain - not just direct suppliers - at a time when sector profits and bank credit have largely dried up.
"It's an expensive programme for Tier 1 suppliers to participate in, and only those that are scared to death or desperate have done so," said Jim Gillette, an analyst for consultants CSM Worldwide in suburban Detroit. "At the same time, mom-and-pop Tier 2 and 3 companies are really struggling because they're dependent on bank financing."
The Treasury Department launched the Auto Supplier Support Program to help stabilize the supply base. It committed $3500 million to GM and $1500 million to Chrysler in April and expects to continue the programme for a year.
"At this time, we have no additional plans for the programme," Treasury spokeswoman Meg Reilly said in an e-mail.
GM has provided assistance to slightly more than 370 direct material suppliers, spokesman Dan Flores said. Chrysler has aided about 60, spokesman Max Gates said.
Flores said that although the number of participants "is small," the size of their receivables suggests that many big Tier 1 suppliers are in the programme.
GM suppliers participating in the programme account for up to $11 000 million of GM's projected $25 000 million in auto part purchases in 2009, Flores said.
The federal aid can be provided in two ways: as guarantees of receivables due from GM and Chrysler for delivered parts or to accelerate corporate payments to suppliers for those parts.
There are more than 1800 Tier 1 suppliers to GM and Chrysler, estimated CSM's Gillette, whose firm's figures are used by the Original Equipment Suppliers Association.
Many strapped Tier 1s have not sought aid because of the high fees charged by the government to participate in the programme, supplier lawyers said. Fees have amounted to hundreds of thousands of dollars apiece for some suppliers, said Stephen Gross, a lawyer with McDonald Hopkins in suburban Detroit who represents about 30 suppliers.
Other suppliers have balked at the red tape, said Michael Fleming, a suppliers' lawyer with Plunkett Cooney in suburban Detroit.
Neither GM nor Chrysler would reveal the names of any aid recipients, nor would the Treasury Department. They also declined to disclose how much aid recipients got.