GM Cash Crunch: New 60-Day Payment Terms Force Suppliers to Bankroll the Biz

Robert Farago
by Robert Farago
gm cash crunch new 60 day payment terms force suppliers to bankroll the biz

TTAC has secured a letter from GM’s purchasing department whereby the ailing American automaker informs its suppliers that it’s changed its payment terms. GM used to pay its indirect (i.e. non-production) suppliers “second day, second month;” roughly 35 days from receipt of goods. The new agreement stipulates payment will be made at 60 days from receipt of invoice. In effect, GM’s cash position has deteriorated to the point where it’s borrowing from its suppliers to survive. The letter was sent to GM suppliers on September 26. The new policy went into effect on October first, giving suppliers no chance to plan or prepare for the change. Their cash flow is now under threat; many won’t be able to arrange the financing needed to carry the cost. If this policy is widened to direct, production suppliers, the impact could be catastrophic.

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  • Obbop Obbop on Oct 09, 2008

    Look into the building industry and how contractors so often abuse sub-contractors in regards to payment or lack there-of. Sadly, it is the home owner who gets shafted when the sub-contractor is doing remodeling work or whatever upon an already-owned abode. Gotta' love the USA economic system. Do unto others before they can shaft thee. And I am supposed to fight all enemies foreign and domestic to defend that? BAH!!!!!!!!!!!!!!!

  • Ronin Ronin on Oct 10, 2008

    Wait, folks, this announcement is specifically for INDIRECT suppliers. This does not include Tier-1s or other suppliers whose products directly make up a car or other production product. Indirect suppliers are responsible for things such as office supplies, maintenance supplies, soap in your bathroom office bathroom, coffee for the guard shack, etc.

  • Truthbetold37 Truthbetold37 on Oct 10, 2008

    This does pay them weekly (more often)

  • Fisher72 Fisher72 on Oct 10, 2008

    "NEW YORK ( -- General Motors is not considering bankruptcy, the company said in a prepared statement Friday morning. The statement was in response to the company's precipitous stock price decline the previous day, a spokesman said." Denial, it is not just a river.