The Auto Writer

Here A Billion, There A Billion

For many months now, we’ve heard plenty about the fortunes of General Motors, Chrysler and Ford, with the first two automakers receiving government bail out money while Ford sits on the sidelines hoping consumers realize that they aren’t in the same precarious straits as its American counterparts.

We have also heard that the supply chain supplying the Big Three, indeed the companies supplying all domestically produced cars whether they be Toyotas, BMWs, Nissans, Subarus or what have you, have been taking it on the chin to the point where their insolvency could shut down the entire industry. That news has traveled to Washington, DC where the Treasury Department has made good on its promise to help out by providing a $5 billion program to assist auto parts suppliers, a move announced yesterday.

Money For Auto Parts Suppliers

Dubbed the Supplier Support Program, the funds will be pulled from the Treasury’s Troubled Asset Relief Program (TARP) fund, that $700 billion emergency measure foisted by panicked politicians on the American populace last fall. If you recall, those funds were needed “at once” in order to prop up the economy, but strangely were only half used by the time President Obama took office on January 20th.

Prior to this measure, the federal government dispensed $17.4 billion in taxpayer money to bail out General Motors and Chrysler. Both companies are asking for a follow up cash infusion while Ford has indicated that they remain viable and are not in need of financial assistance.  Some time around March 31st, the federal government is expected to announce what additional assistance will be made forthcoming, if any, for GM and Chrysler.

On The Verge Of Insolvency

The auto supply industry has been getting hammered for several years now as their fortunes are tied in with the health of the Big Three mostly. Companies such as American Axle, Lear, TRW Automotive and Visteon provide a number of essentials parts including transmissions, seats, surround sound audio systems, side object awareness technology, electronic stability control, hydraulic steering and more.

Foreign car manufacturers who produce cars in North America have as much to lose if any one of the companies goes bankrupt, possibly shutting down factories if key parts and components are no longer available. However, some analysts believe that the Treasury Department’s move doesn’t go far enough, stating that the industry needs at least $25 billion in loans to survive.

$100 Billion Auto Industry Package?

When all is said and done, look for the federal government’s bail out of the auto industry to top $100 billion which will include monies to the automakers, suppliers and a cash for clunkers program designed to get consumers to buy cars once again. The Obama administration has promised to spend big in order to get the economy moving again while the Treasury Department is doing their part to pass the cash around.

Source: The Wall Street Journal