Auto Parts Suppliers – Bailout Needed

The ripple effect from the decline in GM, Ford and Chrysler has been spreading. Auto parts suppliers have seen their business cut significantly and many of these auto parts companies don’t think they will be able to stay afloat without help from Uncle Sam. Two major auto parts supplier groups will soon make a formal request for a loan from the government. They are expected to ask for $25 billion in order to stay in business. The Original Equipment Suppliers Association states that auto parts suppliers employ about 600,000 people in the U.S. A collapse of this industry would be a major blow to the already difficult U.S. economy.

Companies such as FormTech Industries employs 44o people in Royal Oak, Michigan. They make shafts, gears and other components from raw steel. FormTech’s parts end up in about ninety percent of GM, Ford and Chrysler vehicles. Michael Ryan, President and CEO of FormTech, is almost out of cash and may soon be unable to purchase the raw materials the company uses to create their products.

Auto parts suppliers are normally paid 45 days after delivery of the products. This further adds to their current cash crunch.  The request for government assistance will include a $7 billion lump sum to be used specifically to help speed up the payments to suppliers.

All threats to the auto industry are also threats to motor sports. We have already seen racing teams such as Honda pull out of Formula 1 due to cost concerns. Formula 1 has started to significantly change regulations with cost cutting in mind knowing that auto manufacturers are hurting. Let’s hope the economy and auto industry turns around as soon as possible and this whole problem soon becomes a distant memory.

Source: The AP


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