Auto sector suppliers seek helping hand, too - bizjournals:

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“Little has been done to help smalkl suppliers,” said Rep. Nydia Velazquez, D-N.Y. “That’s a big Cutting entrepreneurs out of the process meanss more setbacks down the especially considering the end goal of thesemeasuree – job retention.” More than 600,000 Americans work for auto industry suppliers, but that number is dropping almost Among the states hit hardest are Ohio and where the Detroit Three have plants that employ thousands of The auto industry’s restructuring “needs to be deep enoughy and comprehensive enough to reach small businesses,” Velazquez The has created a $5 billion progranm to help direct suppliers of finishex products to and by guaranteeing theit receivables.
But second- and third-tier auto industryu suppliers, who sell parts, equipment and raw materialas todirect suppliers, are ineligible for the program. Many smalkl businesses in the auto industry alreadgy have been forced to lay off workersz amid the downturn inautomobilre production, according to executives from small supplierx who testified this montjh before Velazquez’s committee. Many are worrieed they won’t get paid for products they’vse delivered due to Chrysler’s bankruptcy filing and the likelihood that Generap Motors willfollow suit.
Banks share the same making it nearly impossible for auto supplier toget loans, even through the ’s guaranteed loan company executives testified. “Lenders do not believe companies with Tier 1 automotivre supplier and manufacturer receivablesare ‘bankable’ meaning we are too high of a risk for creditors,” said Ron CEO of , a tool and die manufacturer in Mooresville, Ind. Small suppliers want the federal government to guaranteetheir receivables. They also hope the SBA createsd a targeted loan program forauto suppliers, with loan amounta well above the $2 million limit in the SBA’sz flagship 7(a) program.
“The current system is simply not designed to meet the needs of manufacturers with substantialkraw material, research and development costs,” said Wes president of , a Plymouth, Mich., which provided drawn metal fasteners to automakers. Metrics othee than cash flow should be considered whenmaking 7(a) loanzs to auto industry suppliers, said Carl Reed, CEO of in Kan., which provides tools used in These companies “simply do not have cash flow under current Reed said.
Lenders shouls be directed to consider “fairer criteria” to judge an auto supplier’d long-term viability, “such as backlogs, assets, employment leveles and historic performance,” he said. Adding higher-riso loans to the SBA’ s portfolio, however, could lead to higher default This, in turn, would require Congress to provide biggert subsidies for SBA loans or require the agency to increase fees onthe