Ronald Reagan once said that the scariest words in the English language are “we’re from the government and we’re here to help.” For troubled auto suppliers though, there are scarier things than government assistance. Specifically, government assistance administered by GM and Chrysler. Automotive News [sub] reports that the the newest automaking branches of the federal government will be in charge of allocating the $5 billion in supplier aid, and that they’ll be using the money to settle old scores. According to AN‘s breezy prose, GM and Chrysler may “pass over” suppliers that have sought to protect themselves from OEM bankruptcies by demanding payment in fewer than 45 days or arguing that insolvency worries allow them to break contracts with the automakers. After all, the government didn’t think the supplier rescue money would go to the most in-need firms, did it?
In order to qualify for the program’s credit or loan guarantees, all suppliers must meet “qualifying commercial terms” with GM and Chrysler. And the gruesome twosome insist that contracts which were renegotiated to keep suppliers afloat do not qualify on these terms. In other words, if a supplier was struggling enough to renegotiate with an OEM they almost certainly won’t receive any government assistance. Analysts note that “hundreds” of suppliers have asked GM and Chrysler for renegotiation, and that they will either return to the original contracts (which brought them to these dismal circumstances) or simply do without the loans. With a government aid to suppliers now twisted into a tool of coercion for the OEMs, is it at all surprising that this plan is said to have originated with GM VP Bo Andersson?