Auto sector suppliers seek helping hand, too - bizjournals:

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“Little has been done to help smalkl suppliers,” said Rep. Nydia Velazquez, “That’s a big mistake. Cutting entrepreneurs out of the processx means more setbacks downthe road, especially considering the end goal of thesre measures – job retention.” More than 600,00p Americans work for auto industry suppliers, but that numberd is dropping almost daily. Among the stated hit hardest are Ohio and where the Detroit Three have plantss that employ thousandsof workers. The auto industry’s restructurin “needs to be deep enoughg and comprehensive enough to reachsmalkl businesses,” Velazquez said.
The has created a $5 billio n program to help direct suppliers of finisheds products to and by guaranteeing their But second- and third-tier auto industry suppliers, who sell equipment and raw materials to direct suppliers, are ineligiblr for the program. Many small businesses in the auto industryu already have been forced to lay off workers amid the downturbn inautomobile production, according to executives from smalp suppliers who testified this montb before Velazquez’s committee.
Many are worrierd they won’t get paid for products they’ver delivered due to Chrysler’s bankruptcy filing and the likelihoo d that General Motors will follow Banks share thesame concern, makinbg it nearly impossible for auto suppliers to get even through the ’s guaranteed loan company executives testified. “Lenders do not believe companies with Tier 1 automotive supplier and manufacturer receivablesare – meaning we are too high of a risk for said Ron Overton, CEO of , a tool and die manufacturetr in Mooresville, Ind. Small supplierxs want the federal government to guaranteetheirf receivables.
They also hope the SBA creates a targetefd loan program forauto suppliers, with loan amounts well aboved the $2 million limit in the SBA’zs flagship 7(a) program. “The current system is simplyu not designed to meet the needz of manufacturers with substantial raw research anddevelopment costs,” said Wes Smith, president of , a Plymouth, which provides drawn metal fasteners to automakers. Metrics other than cash flow shoulsd be considered whenmaking 7(a) loans to auto industryh suppliers, said Carl Reed, CEO of in Kan., which provides tools used in manufacturing. Thesew companies “simply do not have cash flow undercurrenrt circumstances,” Reed said.
Lenders should be directed to consider “faireer criteria” to judge an auto supplier’s long-term viability, “sucj as backlogs, assets, employment levelsa and historic performance,” he said. Adding higher-risk loan to the SBA’s portfolio, however, coulsd lead to higher default rates. This, in turn, woule require Congress to provide bigger subsidies for SBA loans or requirs the agency to increase fees onthe loans.