Holy printing press Batman! Those are some serious spondoolies! Or are we at the point now where $10b worth of federal largess for the U.S. auto industry is just another day at the office? Automotive News [AN] sure seems non-plussed. “The companies will ask for the loans to be funneled through the Detroit 3 so suppliers can be paid in 10 days for parts delivered instead of the usual 45 days, said Neil De Koker, president of the Original Equipment Suppliers Association in suburban Detroit. The association also will ask the Treasury Department to guarantee certain supplier receivables so parts makers can use that owed money to borrow the working capital they need to operate, De Koker said.” So Uncle Sam loans $10b to companies to supply automakers to whom we’ve already loaned $13.4b, who aren’t selling Jack at the moment, whose “viability plans” have yet to be scrutinized. Makes sense to De Koker, ’cause “without government help, hundreds of suppliers might close or be forced into Chapter 11 bankruptcy protection.” What happens when all these companies are in default of their federal loans?
“usual 45 days”? Aren’t we talking about single source suppliers who could/should demand COD? If they’re demanding COD and there’s no money, where’s the first tranche gone already?
Apart from a bring forward cash flow effect, how does this help total sales?
Aw shucks! Why not make it 10 billion dollars each!
The old joke was if you wanted to fix the traffic congestion problem you let the government build the cars and the auto companies build the roads. Overnight you would have the problem solved.
Now we are going to let the government build the cars and the roads. The Pelosimobile lives!
List of government built cars
Pelosimobile
Trabant
Lada
Yugo
Must be more of these clunky junky government products?
not sure where they got that 45 day figure from, most payment terms across the board were renegotiated to 120 days many months ago.
How does one bailout bad management, especially when you’re in c11 to begin with. You think they’d recognize that.
This is why animals will sometimes eat their young in the wild during times of extreme stress (drought or famine, etc.) but not as ongoing way of life. The animals in this case, GM/Ford/Chrysler, have been eating their young (the supply base) for MANY years and now the survival of the entire species (Detroit auto industry) is on the brink of extinction.
Galatians: “….for whatsoever a man soweth, that shall he also reap.”
We ain’t seen nothin’ yet. A couple of quotes from Davos:
“The crisis is getting worse,” Rupert Murdoch, chief executive officer of News Corp., said at a press conference to kick off the five-day event today. “It’s going to take very drastic action to turn that around, if it can be turned around, quickly. I believe it will take quite a long time.”
“You have to realize the size of the problem confronting us today is significantly larger than in the ‘30s,” George Soros, the billionaire hedge-fund owner and philanthropist, said today. “The situation will continue to deteriorate.”
Just one in five of 1,124 chief executives in 50 nations said they were very confident about prospects for revenue growth in 2009, down from half last year, and more than a quarter said they were pessimistic, a survey by PricewaterhouseCoopers LLP showed. The sentiment was the worst since the accounting and consulting firm began tracking the CEO outlook in 2003.
Soon the suppliers of the suppliers will need money. This is never going to end.
@ snafu: You information is not correct (can’t say much more than that – sorry).
This sounds like more of a bailout for the OEMs than it does for the supply base.
I coulda used the cash before we got a headcount reduction….
Where’s my bailout?
paid in 45 days? Wasn’t it more like 6 months if i remembered an TTAC article correctly