Building from a previous post on the financial troubles of suppliers, the Associated Press announced today that the Treasury Department will launch a new $5 billion program to help stabilize the supply base linked to Detroit’s automakers. The aid will come from the government’s Troubled Assets Relief Program.
Suppliers will be able to borrow money from banks using participating automakers’ accounts receivable backed by government guarantees as collateral or they will obtain direct funding from the government fund. The government guarantee will require the payment of a fee of two percent of the guaranteed accounts receivable and an additional one percent for direct funding.
According to the Detroit News, Treasury Secretary Tim Geithner said in a statement released today:
“The Supplier Support Program will help stabilize a critical component of the American auto industry during the difficult period of restructuring the lies ahead … The program will provide supply companies with much-needed access to liquidity to assist them in meeting payrolls and covering their expenses, while giving the domestic auto companies reliable access to the parts they need.”