- The Washington Times - Saturday, February 14, 2009


Saving the U.S. auto industry will take more than bailing out GM and Chrysler. It also hinges on companies like FormTech Industries, which employs just 440 people and forges steel for parts under the hoods of cars and trucks. And now those suppliers are asking for a bailout of their own.

Auto suppliers have asked the Obama administration for up to $25.5 billion in loans and government guarantees to stabilize the battered U.S. auto industry.

Two trade groups, the Original Equipment Suppliers Association and the Motor & Equipment Manufacturers Association, made the request to the Treasury Department on Friday. The aid would prevent a shortage of parts for key vehicle models.

Suppliers asked for an initial $7 billion that would go to General Motors Corp. and Chrysler LLC so they can speed up payments to parts companies. They also want the government to guarantee up to $10.5 billion in longer-term payments automakers will owe suppliers and $8 billion in federal loans to parts makers.

“You can’t just provide support for the manufacturers, which I hope we do, and then see the suppliers go under,” said Sen. Carl Levin, Michigan Democrat. “It takes both parts to hold up the industry.”

So far, federal help for the auto industry has been confined to GM and Chrysler and their financing arms. GM and Chrysler have to turn in plans by Tuesday showing the government how they plan to restructure and turn profits.

For the parts suppliers, which have been scraping by for years, the automakers’ efforts to survive by shutting down their assembly plants for long stretches have only made things worse.

In the coming weeks, the suppliers expect to see their revenue all but disappear.

Consider FormTech, in Royal Oak, Mich., whose workers shape metal into parts that wind up in 90 percent of Ford, GM and Chrysler’s models. President and CEO Michael Ryan says he is nearly out of cash and unable to pay for raw steel.

FormTech takes raw steel and forms it into gears, shafts and other components that automakers or other suppliers use to make parts like transmissions and axles.

“If our parts aren’t forged, there’s nobody that’s going to machine and there’s nobody that’s going to have them for transmissions and axles and driveline systems,” Mr. Ryan said.

Suppliers normally are paid 45 days after delivery. That means that even though automakers are slowly restarting production after their holiday shutdowns, the suppliers might not see their money until March. And banks are against lending to any company in the faltering auto industry.

The answer, say Mr. Ryan and trade associations representing 5,000 suppliers, is a loan from somewhere, most likely the government, to keep the companies going long enough to weather the crisis.

“We’re fighting for our lives here trying to keep the thing running,” Mr. Ryan said. “The best thing that could happen to us is get a straight-up loan at a reasonable interest rate.”

The Original Equipment Suppliers Association says it knows the industry will have to shrink, but it predicts chaos without government help as supplier after supplier fails. Parts makers employ about 600,000 people nationwide.

Mr. Ryan said he is negotiating with automakers to pay for his raw materials so he can keep forging, but he has delayed payments to steel companies for about as long as he can. The next step would be filing for bankruptcy protection.

“There’s going to be a number of suppliers that are not going to make it,” said Mark Willett, vice president of sales and marketing for Means Industries Inc., a small transmission parts maker in Saginaw, Mich.

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