DETROIT -- U.S. auto suppliers have asked for $18.5 billion in government aid to see them through the industry downturn.
The suppliers requested $8 billion in loan guarantees so parts makers can borrow from commercial banks, said Neil De Koker, CEO of the Original Equipment Suppliers Association.
The other $10.5 billion is for government guarantees of supplier receivables from the Detroit 3. Those loans would allow suppliers to use their receivables for parts already delivered as loan collateral with traditional lenders, De Koker said.
As part of the $10.5 billion, about $7 billion would be earmarked for "quick pay" so suppliers could get paid for parts within 10 days of delivery instead of the traditional 45 days.
The request came in a formal petition filed with the U.S. Treasury Department by the Motor & Equipment Manufacturers Association and its affiliate, the suppliers association.
Suppliers are trying to survive in the worst automotive sales and production conditions in decades, De Koker said. Vehicle production cuts of more than 50 percent in the past two months have left suppliers with meager paydays in February and March.
Hundreds of suppliers are expected to succumb to cash losses unless the loans are approved, De Koker said. Normal monthly supplier receivables from the Detroit 3 are about $15 billion. In this downturn, they have fallen to about $5 billion to $7 billion.
The loans will help suppliers survive until production rebounds, De Koker said, adding, "We have to help suppliers survive the next couple of months."
Bob McKenna, CEO of the Motor & Equipment Manufacturers Association, said in a statement: "The dramatic downward spiral that the supplier community witnessed in the last few months necessitates immediate action from the Treasury Department.
"We are not seeking blanket protection from natural consolidation but need temporary relief to sustain the very foundation of the domestic auto industry and a critical sector of the nation's economy."
The submission to Treasury states that more than 40 major suppliers filed for Chapter 11 bankruptcy in 2008.
Industry surveys indicate that about one-third of all suppliers are in imminent financial distress, and another one-third will be in distress during the first quarter of 2009, according to a release by the two associations. The submission also states that 1 million U.S. jobs could be at risk.
The manufacturers association represents suppliers of motor vehicle parts to vehicle manufacturers and the aftermarket.
The Original Equipment Suppliers Association represents more than 400 companies that supply parts to vehicle makers.
Global automotive sales by members of the association exceed $300 billion a year and account for 65 percent of North American automotive supplier sales.