Detroit Free Press

Lansing delegation to lobby for suppliers

Dillon leads group to seek billions

 

BY JEWEL GOPWANI and CHRIS CHRISTOFF • FREE PRESS BUSINESS

WRITERS • February 25, 2009

 

The Michigan Legislature's top four leaders will make an unusual trip to

Washington today to lobby President Barack Obama and members of

Congress to extend financial assistance to automotive parts suppliers,

who continue to post losses as new car and truck sales plummet in the

ailing economy.

 

General Motors Corp. and Chrysler LLC have already received $17.4

billion in aid, and their suppliers are asking for more than $25 billion in

support, too. The need is immediate, some experts say.

"In the next few weeks, it's really coming to a head," said Tom

Spillane, automotive partner at Foley & Lardner. "The suppliers are

just running out of money. They're looking at potential bankruptcies

of the car companies. I think they're lost on what to do."

 

House Speaker Andy Dillon, D-Redford Township, and three other state

legislators will go to Washington today to meet with representatives of

Obama and Michigan's congressional delegation, and an organization

that represents domestic and foreign auto suppliers.

 

"It's complicated, and it's probably more urgent than support for the Big

Three," Dillon said of aid to suppliers.

Dillon will be joined in Washington by Senate Majority Leader Mike

Bishop, R-Rochester; House Minority Leader Kevin Elsenheimer, RKewadin,

and Senate Minority Leader Mike Prusi, D-Ishpeming.

 

Dillon said his counterparts in 13 other states will travel to Washington

on behalf of the auto industry or send letters to Congress and the

president. He said it's important for the president and Congress to

understand the complexity of the auto supplier network.

 

Of the suppliers that sell parts to GM, 51% also sell parts to Ford Motor

Co. and 56% sell parts to Chrysler, according to figures compiled by CSM

Worldwide, which were included in a proposal for federal aid by the Motor

Equipment Manufacturers Association.

 

The group has asked the Treasury to back up to $18.5 billion in loans to

suppliers and payments owed to partsmakers. It also seeks $7 billion in

loans to the automakers that would pay suppliers in 10 days instead of

about 45 days.

 

Suppliers are in dire need of cash for two main reasons: Production

volumes fell in December and January, and so did sales for auto

suppliers, who are being paid now for sales made in those months.

Suppliers would ordinarily turn to banks to fill in that gap, but in a tight

credit market, banks don't want to take any more risks on the auto

industry.

Suppliers are falling short of the money they need to ramp up

production. Banks will be more likely to loan money to auto suppliers

if the government backs those loans, Spillane said.

 

Without assistance, some suppliers would have to file for bankruptcy,

or go out of business. He said, "I think you could have a cascading

effect of bankruptcies through the supply industry.