A delay in federal aid could speed up General Motors’ collapse by prompting suppliers to demand shorter payment terms to protect themselves from the threat of not being paid in a bankruptcy, US analysts said.
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Sean McAlinden, chief economist at the Centre for Automotive Research, told the Detroit Free Press he thought suppliers would begin demanding faster payment terms before delivering parts in early December, and GM won’t be able to fulfill the request. That could shut things down quickly, McAlinden told the Motown paper.
“By the first week of December, the supplier sector, which has to respond to its own board and banks, will start demanding earlier payment,” McAlinden said. “The whole system will start shutting down. … Eventually some suppliers will stop shipping.”
The Free Press noted that GM had said it might not have enough cash to pay its operating expenses for the rest of the year without federal loans, and there was concern that a delay of assistance could speed up the automakers’ financial problems, such as causing panic among GM’s suppliers.
Spokeswoman Renee Rashid-Merem told the Detroit Free Press GM had not changed or altered payment terms to the companies that supply parts for its vehicles.
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By GlobalData“Any supplier that has expressed concern, we’ve assured them we will continue to satisfy any payment obligations,” she told the paper. “And we’ve never failed any payment obligation to suppliers, and we don’t intend to do so.”
Still, people familiar with GM’s contingency planning told the Free Press it was a real concern.
Some suppliers were demanding customers shorten payment times while lawyers said the chances of suppliers achieving that were slim, the paper added.
