General Motors is to speed up some payments to suppliers to help them deal with the planned closure of some of the automaker’s assembly plants for up to nine weeks in the summer.
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GM, facing a 1 June US government deadline to reorganise out of court or file for bankruptcy protection, will bring forward payments due on 2 June to 28 May, Bloomberg News reported at the weekend.
GM spokesman Dan Flores said the faster payments were to help suppliers deal with the closure of 14 North American plants for as much as nine weeks this summer. Several hundred suppliers in the region would be paid early, according to the report.
Bloomberg said the move would ensure payments for some of GM’s more than 1,500 direct suppliers in North America should the automaker file for bankruptcy by the 1 June deadline imposed by the Obama administration’s Treasury-supervised autos task force. In some cases, suppliers are not paid until after as many as 60 days after the parts are shipped.
“It certainly helps add more certainty to those cash flows given that looming 1 June date,” CSM Worldwide supplier analyst Mike Wall told Bloomberg. “Obviously the suppliers are concerned that [if] they have receivables out there, will they get paid or not?”
The report noted that Chrysler, which filed for Chapter 11 bankruptcy on 30 April, received bankruptcy court approval to pay critical vendors – it has since halted vehicle production until a newly created company buys the best assets in a month or so.
Flores told Bloomberg GM was supporting supplier cashflow amidst drastic production cuts resulting from the lowest US auto sales rate since the 1980s.
“With all the marketplace uncertainty and the plant production downtime, we’re taking this action to help auto suppliers,” he said.
In addition, GM and Chrysler are participating in a US Treasury aid programme that guarantees the automakers’ payments to suppliers for a 2% fee, or pays them up front for 3%. GM, which has access to US$3.5bn from the initiative, and Chrysler, which got $1.5bn, chose the partsmakers that could participate, Bloomberg said.
Meanwhile, the Treasury said it was attempting to prevent a widespread collapse in auto production because the supply base is interconnected. Ford, now the only self-sufficient US-based automaker, said in a regulatory filing on Friday that the pressure on its suppliers was a risk to its own cash flow.
“It is reasonably possible that our costs to ensure an uninterrupted supply of materials and components could be higher than our present planning assumptions by a material amount,” the Dearborn, Michigan-based automaker was quoted as saying.
