On March 19, 2009, the United States Department of Treasury (“Treasury Department”) announced a new Auto Supplier Support Program (“Program”) with the goal of stabilizing the auto supplier base in the United States, in light of certain auto suppliers’ inability or difficulty in accessing needed credit and the significant decline in auto sales. The Department of Treasury, GM and Chrysler officially launched the Program on April 8, 2009. The Program is administered by Citibank, N.A. (“Citibank”) and specifically provides auto suppliers with access to government-backed protection that ensures that money owed to them for the products they ship to certain manufacturers will be paid no matter what happens to GM and Chrysler. The Treasury Department will protect up to $5 billion of receivables. The total of $2 billion is allocated to GM and $1.5 billion to Chrysler. It is important to note that although the Treasury Department has established what appears to be a single Program, the Program may differ as it is administered by GM and Chrysler.
According to the Treasury Department, receivables eligible under the Program are any receivables created with respect to parts shipped after March 19, 2009, that are made on qualifying commercial terms between a supplier and GM or Chrysler. However, the Program administered by GM and Chrysler differ and it is clear that not all receivables will be covered. For example, receivables created with respect to parts manufactured in the United States but sold to GM plants located outside of the United States will not be covered. If you are a supplier, you will need to review the specific Program to determine if all, a part or none of your receivables will be covered.
Eligible suppliers under this Program are those suppliers that obtain a U.S. DUNS number and supply to a U.S. GM or Chrysler location with invoices denominated in U.S. dollars. GM and Chrysler are provided discretion to determine which suppliers and receivables will be granted protection under the Program. Although we have obtained some information that some subsidiaries of foreign corporations have been denied participation by GM, it appears that GM’s and Chrysler’s policy is to approve participation in the Program by subsidiaries of foreign corporation even if the parts supplied GM and/or Chrysler are not manufactured in the United States. Suppliers who were previously denied participation should reconfirm their eligibility with GM and/or Chrysler. If granted participation, the suppliers will be required to pay a fee for participation in the Program. The fee charged to the suppliers will be 2% of the face value of the receivable for receivables to be paid on normal payment terms. In addition, suppliers may choose to be paid immediately (i.e., 4 days after receipt of the parts covered by the receivable) in which case the fee will be 3% of the face value of the receivable. According to one news source, in addition to the fees, Chrysler's suppliers reported that Chrysler was requesting that they extend their payment period from 45 days to 50 days for the first option. To our knowledge, no such request is being made under the GM Program.
PAYMENTS OF RECEIVABLES THROUGH CITIBANK
Citibank is administering the Program at the request of the Treasury Department. It will not charge any fees to participating suppliers, other than the discount fee of 2% or 3% discussed above. If a supplier wishes to participate in the Program, they must execute documents with Citibank and either Chrysler Receivables LLC or GM Receivables LLC no later than May 4, 2009. This May 4th deadline will permit the inclusion of the March 19th through April 14th receivables into the Program. Although the suppliers may participate in the Program after May 4th, such participation only covers receivables entered within 20 days of its issuance.
Additional information can be obtained from the following Citibank web pages:
http://www.citibank.com/transactionservices/home/sa/2008/calc/chrysler/ for Chrysler Program
HOW TO PARTICIPATE
If suppliers have questions with regard to the Program or are interested in participating in the Program, they should contact GM’s and/or Chrysler’s procurement department. Because participation is not automatically granted to suppliers, it is necessary for them to express to auto manufacturers that they wish to participate in the Program.