Washington Urged to Facilitate More Lending
Eric Mayne Ward's AutoWorld, Jan 1, 2010 12:00 PM

Beleaguered suppliers will continue to parade through U.S. bankruptcy courts and America's auto industry will miss the green economy boom unless more capital becomes available, experts warn.

“General lending is selectively returning,” says Dave Andrea, Original Equipment Suppliers Assn. vice president-industry analysis. But companies with annual revenues in the $100 million-$150 million range are targeted with “tremendous” borrowing costs, he adds.

“The terms are far from normal,” Andrea tells a recent Center for Automotive Research conference. “A number of bankruptcies will still continue to occur.”

OESA member companies accounted for 54 Chapter 11 filings in 2009, including 14 from among the industry's 150 top-ranked suppliers. The global recession, which has reduced volumes to record lows, is to blame.

The number of liquidations is unknown, Andrea says. But for every supplier that suffered publicly through bankruptcy or permanent closure, OESA calculates 10 others likely flew under the radar.

“Suppliers were violating bank covenants all over the place,” Andrea says, adding little relief is anticipated in 2010.

A key indicator: OESA surveys indicate suppliers are being “very, very conservative” on the hiring front, he says.

The troubling trend prompted the Motor & Equipment Manufacturers Assn. to urge action by Congress and the Obama Admin. Among MEMA's recommendations: relax guidelines for loan programs managed by the Small Business Admin.

Suppliers produce two-thirds of the value of today's vehicles and are “helping to lead the way to the next generation of safer, cleaner, more fuel-efficient vehicles,” MEMA President and CEO Bob McKenna says.