Obama Administration Turns Down Auto Suppliers' Aid Request
16 Juni 2009 - 5:46PM
Dow Jones News
The Obama administration has turned down a request by auto-parts
suppliers for up to $10 billion in new aid, concluding that the
government shouldn't further interfere in the industry's
contraction.
In rejecting the request late last week, the Treasury Department
appears to have drawn a line in how much taxpayer money it is
willing to spend on saving the U.S. auto industry. The move also
indicates that the administration is confident that its
multibillion-dollar effort to save General Motors Corp. (GMGMQ) and
Chrysler LLC has stabilized the car industry.
Neil De Koker, president and chief executive of the Original
Equipment Suppliers Association, said Obama adviser Ron Bloom
turned down the suppliers' request in a meeting last week.
Bloom and several of his staffers told De Koker "that
consolidation for the industry needs to take place."
"'We all recognize that and we don't think that having a general
program of assistance to all suppliers would help that, nor is
needed at this time'," De Koker, in an interview with Dow Jones
Newswires, recalled them saying.
Bloom added that the administration didn't feel that the
prospect of more supplier bankruptcies in coming months posed a
systemic threat to the auto industry, De Koker said.
"They felt that, unless we see chaos or a disorderly situation
arising where we have assembly-line shutdown due to lack of ability
to get parts or stuff like that, then we would relook at this
situation, but that at the present time we believe everything is
working," De Koker said.
A Treasury spokeswoman said this week that "at this time, no
changes have been made to funding."
The administration "will continue to monitor the situation," she
said in a statement.
Auto suppliers had asked for the government to guarantee between
$8 billion to $10 billion in loans so banks will lend to the
suppliers. The aid would be on top of a $5 billion support program
for suppliers that the administration put in place earlier this
year.
Trade groups warned that hundreds of suppliers could collapse
without further government aid as the bankruptcy filings of GM and
Chrysler deepen the suppliers' troubles.
The administration's rejection may prompt Congress to act.
A U.S. senator said Tuesday he planned to introduce legislation
to provide more aid for auto-parts suppliers.
Sen. Sherrod Brown, D-Ohio, said in a statement that the
proposed legislation would "provide a new funding source to help
auto suppliers and other manufacturers retool for the clean energy
industry." He plans to unveil the proposal Wednesday on Capitol
Hill.
The plan, which Brown said has the support of business,
environmental and labor leaders, would aim to prevent a wave of
bankruptcy filings by parts companies while helping them retool to
build more fuel-efficient cars.
-By Josh Mitchell, Dow Jones Newswires; 202-862-6637;
joshua.mitchell@dowjones.com
(Jeff Bennett contributed to this report.)