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Auto Supplier Support Program

March 20, 2009

On March 19, 2009, the U.S. Department of Treasury announced an Auto Supplier Support Program to provide up to $5 billion in financial assistance to certain suppliers of any domestic automakers electing to participate in the program. The program will provide eligible suppliers selected by participating automakers with (1) access to government-backed guarantees for certain receivables from the participating automakers for a fee, and (2) the ability to sell certain of their receivables into the program at a discount. The financial terms of the program have not yet been determined.

Any U.S.-based auto supplier that agrees to ship to a participating automaker may be eligible to receive benefits under the program with respect to receivables created from goods shipped after March 19, 2009. In order for an auto supplier to be eligible, the supplier must agree to maintain “qualifying commercial terms” (which have yet to be determined). Decisions about which suppliers and which receivables will receive protection under the program will be made by the participating automakers.

In its March 19, 2009 press release, the Treasury indicated that General Motors and Chrysler have already agreed to participate in the program. The Treasury recommended that auto suppliers contact the procurement officer at their customers that agree to participate in the program for information about the process for enrollment those automakers will establish. However, to date neither General Motors nor Chrysler have further details on the program or can provide information on how to proceed. Those who wish to consider selling receivables into the program should contact any relevant lenders to determine whether any lender consents may be required.

Certain aspects of the program have not been fully resolved. Ford indicated that it does not intend to participate in the program. It is unclear whether Ford or other domestic automakers will ultimately elect to participate in the program, and how non-Tier 1 auto suppliers can participate in the program. We continue to monitor developments in the program. If you would like to consider requesting participation in the program, you may wish to contact the procurement officers at your participating customers when they are set up to respond. We will also monitor the readiness of participating automakers.

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