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