Treasury providing $5B in aid to auto suppliers

WASHINGTON -- The Obama administration announced Thursday a $5 billion financing plan to aid struggling auto suppliers.

The Treasury Department said the program was not meant to save every firm, saying that "the failure of certain suppliers is a natural, albeit painful, part of the business cycle."

"But as the restructuring process moves forward, the Administration is committed to helping stabilize the industry, protect American jobs, and give consumers the confidence and the means to purchase cars," the Treasury said in a statement.

Michigan lawmakers hailed the plan. Rep. Sander Levin, D-Royal Oak, said the program was a "valuable first step." Sen. Debbie Stabenow said the plan was "a very significant sign that they understand the importance of suppliers, and they want to help."

With industry analyst firm Grant Thornton predicting last week that up to 500 U.S. auto suppliers are on the brink of failure, rescuing the auto supply chain had risen to the top priority for the Obama administration's auto task force. The weakest U.S. sales in four decades triggered massive cuts in production over the past few months, leaving suppliers struggling for cash.

In normal times, a supplier gets paid between 45 and 60 days after shipping a part to an automaker, and can use the promise of that payment as collateral for loans. But in recent months, the collapse of credit markets and the troubles at GM and Chrysler have made lenders unwilling to trust those promises.

The program will offer suppliers two ways to benefit. It will guarantee the payments from automakers to suppliers, easing the concerns of lenders. Auto suppliers may also sell the payment to Treasury at a slight discount for an immediate cash infusion.

The offer only applies to parts shipping after Thursday, and can be used by "U.S.-based" suppliers and automakers. It also gives the automakers the power to decide which suppliers and which parts are eligible.