Comments on: Bailout Watch 446: Feds’ $5b TARP Bailout to Auto Suppliers

By: quasimondo

quasimondo — Thu, 19 Mar 2009 22:37:56 +0000

It could be worse. It could be going to pay retention bonuses to executives whose decisions triggered this mess.

Oh, wait…

By: Eric Bryant

Eric Bryant — Thu, 19 Mar 2009 18:24:33 +0000

Those of us employed by viable Tier 1 suppliers can now look forward to our tax dollars going towards less-than-viable competitors.

If we do this long enough, then all the suppliers will be “troubled”, and the program will gain some sort of perverted legitimacy.

By: Stu Sidoti

Stu Sidoti — Thu, 19 Mar 2009 17:22:58 +0000

So the Feds are giving the OEMs the cash to hold onto with the promise to ONLY use it to pay receivables from the suppliers? Riiiiiiiight.

By: Inthebiz

Inthebiz — Thu, 19 Mar 2009 17:17:18 +0000

This is essentially receivables insurance, which is not uncommon but has become unavailable due to the state of the D3. It effectively allows suppliers to borrow against D3 receivables and thereby have some hope of stemming the cash crunch in which they now find themselves. The phrase to watch here is “…during the difficult period of restructuring that lies ahead”, i.e. this insurance policy effectively comes payable in the event of a D3 payment default, which one must assume is imminent. At best, it will nominally attentuate the supplier carnage which will inevitably result from one or more D3 defaults, and represents a tacit acknowledgement that someone will need to make the bits that you build vehicles from when the mushroom cloud clears, so best we should keep a handful of parts makers around for that happy day.

By: Ingvar

Ingvar — Thu, 19 Mar 2009 17:09:02 +0000

I’m just waiting for a TARP funded dealer and franchise bailout. You know, those dealers that have to close because Detroit ain’t selling anymore… Then, the whole industry is bailed out. Detroit is paid making cars that nobody wants, with parts from suppliers no one would have need of otherwise, and shipping the cars to dealers that has to be paid because none is buying… It makes sense to me…

They can form a little economy of their own, because they will not be a part of the rest of society. A totally none-customer/none-market related car industry. They can ship those cars back and forth until the end of times… They won’t even have to make them, they can just toss numbers and pretend they made them…

By: guyincognito

guyincognito — Thu, 19 Mar 2009 16:52:18 +0000

So they are paying for parts that nobody wants or needs to prop up the excess supply base and their excess capacity? Where does that bailout train end?