Bailout Watch 446: Feds' $5b TARP Bailout to Auto Suppliers

Robert Farago
by Robert Farago
bailout watch 446 feds 5b tarp bailout to auto suppliers

Troubled Assets Relief Program. TARP. And there I was thinking that the point of the fund was to provide “relief” for financial assets. You know; to defend and protect America’s financial institutions. But no. Ever since President Bush allowed technically bankrupt American automakers to raid the fund, the definition of the word “assets” has been… flexible. And now, it includes auto suppliers. Of course, in Bailout Nation, where the Chief Executive must form a 25-plus-member, multi-million dollar (hey, these ARE lawyers) Presidential Task Force on Automobiles to make a decision, you need a whole new level of bureaucracy to bail out auto suppliers. The AP reports.

The administration will create a financial entity to provide money for auto parts that large suppliers have shipped to the Big Three automakers but have not yet been paid for. In a statement, Treasury Secretary Timothy Geithner said the “Supplier Support Program” would “help stabilize a critical component of the American auto industry during the difficult period of restructuring that lies ahead.”

The program will be run through U.S. automakers — General Motors, Chrysler and Ford Motor Co. — that agree to participate. Suppliers to those companies would have to agree to terms of the government-backed protection and pay a small fee for the right to participate.

Suppliers will be able to sell parts that they have not yet been paid for into the government program at a modest discount.

So U.S. auto suppliers have to sign a contract with the feds and pay for their bailout funding? Does this mean the U.S. government– meddling in the industry through a process known as “factoring” will own the parts? So what are the chances they’ll let their “customers” (the bailout zombies known as Chrysler and GM) go out of business?

And am I the only one who sees this as a bizarre justification for propping-up Motown’s accounts payable?

Parts suppliers told Treasury that the estimated March 2009 payments to suppliers from the Big Three automakers are $2.4 billion compared to an average of $8.4 billion per month in the fourth quarter of 2008, threatening their industry.

So if an industry contracts, taxpayers should make sure everyone survives the downturn? Why?

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2 of 6 comments
  • Eric Bryant Eric Bryant on Mar 19, 2009

    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.

  • Quasimondo Quasimondo on Mar 19, 2009

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

  • Tassos Chinese owned Vollvo-Geely must have the best PR department of all automakers. A TINY maker with only 0.5-0.8% market share in the US, it is in the news every day.I have lost count how many different models Volvo has, and it is shocking how FEW of each miserable one it sells in the US market.Approximately, it sells as many units (TOTAL) as is the total number of loser models it offers.
  • ToolGuy Seems pretty reasonable to me. (Sorry)
  • Luke42 When I moved from Virginia to Illinois, the lack of vehicle safety inspections was a big deal to me. I thought it would be a big change.However, nobody drives around in an unsafe car when they have the money to get their car fixed and driving safely.Also, Virginia's inspection regimine only meant that a car was safe to drive one day a year.Having lived with and without automotive safety inspections, my confusion is that they don't really matter that much.What does matter is preventing poverty in your state, and Illinois' generally pro-union political climate does more for automotive safety (by ensuring fair wages for tradespeople) than ticketing poor people for not having enough money to maintain their cars.
  • ToolGuy When you are pulled over for speeding, whether you are given a ticket or not should depend on how attractive you are.Source: My sister 😉
  • Kcflyer What Toyota needs is a true full size body on frame suv to compete with the Expedition and Suburban and their badge engineered brethren. The new sequoia and LX are too compromised in capacity by their off road capabilities that most buyers will never use.