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Tier suppliers, big and small, need stimulus, too

With last month’s bailout of Delphi Corp.’s pension by the Pension Benefit Guaranty Corp., yet another big Tier One automotive-parts supplier was rescued from imminent disaster. Such assistance needs to snake its way through the entire supply chain, argue trade associations. The rescue of Delphi’s $6.2 billion pension represents the second-largest ever, by dollar amount, the PBGC has ever performed. Delphi received court approval on July 30 to sell its assets to lenders and General Motors and to exit bankruptcy.

Way back in May, the Motor & Equipment Manufacturers Assn. (MEMA) and the Original Equipment Suppliers Assn. (OESA) testified before Congress that the result of the then-impending Chrysler bankruptcy and planned vehicle manufacturer shutdowns “could be a supplier network no longer able to support vehicle manufacturing in this country.” Wes Smith, a MEMA member and president of E&E Manufacturing, a metal stamping supplier, also testified before the House Small Business Committee at a hearing examining the economic impact of the domestic auto crisis on small suppliers throughout the United States. Smith’s testimony outlined the stresses that dramatically reduced vehicle sales volumes and a crippling inability to gain access to credit place on smaller suppliers. “For suppliers, the drop-off in industry volumes can actually be greater, the credit freeze tighter, and the customer risk more significant,” he said, adding that “assistance targeted to these manufacturers is critical.”

In a letter to the full U.S. House and Senate, MEMA president and CEO Bob McKenna stated, “During these shutdowns, many suppliers will have no choice but to permanently close their facilities.” The letter urged Congress and the Administration to provide direct financial assistance to suppliers beyond the help promised in the Auto Supplier Assistance Program announced by the Department of Treasury in March and to immediately pass a short-term incentive program to encourage consumers to purchase new vehicles.

“We need to take immediate steps to further protect the supply base,” added OESA president and CEO Neil De Koker. “This is a critical time and the stakes could not be much higher. Thousands of good manufacturing jobs and the local economies those jobs support hang in the balance.”    

According to MEMA, automotive parts suppliers constitute the nation’s largest manufacturing sector, directly employing over 686,000 people and contributing to more than 3.29 million jobs. Parts suppliers are also the largest manufacturing employer in eight states: Indiana, Kentucky, Michigan, Missouri, Ohio, Oklahoma, South Carolina and Tennessee.

Recognizing that the landscape has changed, likely for many years if not forever, the OESA is organizing a conference later this year, the OESA 2009 Outlook Conference and 11th Annual Meeting of Members. Scheduled for November 9 at the Detroit Marriott Renaissance Center in Detroit, MI, the theme of the conference is “New Thinking for a New Automotive Industry.” Clare Goldsberry

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