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US Auto Suppliers to Get $5 Billion Federal Aid
Mar 31, 2009

The distressed auto parts’ suppliers in the US are likely to receive federal aid of $5 Billion which will ensure sufficient liquidity for the car companies to clear their dues.
 
The American administration stepped into stabilizing the automobile industry by announcing a fund of $5 Billion to aid the suppliers of auto parts, as reported by Metro News.
 
Weak economy and credit crunch caused 18% decline in sales of new vehicles in the US during 2008. The trend continued during January-February 2009 when 39% decline in overall industry sales was registered as compared to January-February 2008. Till now, General Motors has received federal loans of $13.4 Billion and has asked for up to $16.6 Billion as additional funds. Similarly, Chrysler has been granted loans of worth $4 Billion and it is requesting for further $5 Billion.   
 
The US Treasury Department is trying to provide stability to the battered auto sector and this fund would ensure payments to the auto parts’ suppliers. It is noteworthy that suppliers are severely affected by cut down in production by auto manufacturers and they requested for $18.5 Billion aid in February 2009. Suppliers also warned that if monetary aid is not provided, nearly one million people would lose jobs.
 
Thus, the Supplier Support Program is expected to provide stability to one of the crucial segment of the US auto industry, particularly in wake of the tough time ahead. The program will also provide enough liquidity to the ailing auto companies so that they could meet payrolls and cover their expenditure. It will also enable domestic auto companies to access important parts they use in manufacturing.
 
The program will include the American auto companies willing to participate. As stated by the Treasury, the government will guarantee the suppliers that their dues with auto manufacturers will be paid soon, regardless of the financial position of the recipient company.     
 
According to a Research Analyst at RNCOS, “The US auto sector has been severely affected by the credit crisis and this aid has been announced at a crucial time. It will assist the troubled auto suppliers in the US in a big way if any supplier business collapses, it will upset the car production in the country, causing more damage to the already suffering carmakers.”
 
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