GM's latest woes could cut off credit to suppliers
Monday, 9 March 2009
DETROIT, Michigan, Mar 8 (AFP): Dozens of automotive suppliers could lose their credit lines or end up in loan default because auditors voiced "substantial doubt" about General Motors' ability to stay afloat, industry observers warned.
The impact would likely be felt across the industry because the supply base is so highly integrated.
"People just see the sign and don't realize the extent everyone in the industry shares the same supplier base," said Bob Carter, Toyota Motor Sales vice president.
The auditor's warning on Thursday came as no surprise given that GM is currently funding its operation with the help of 13.4 billion dollars in emergency government loans and has asked for another 22.6 billion dollars in aid.
But it could be enough to trigger similar warnings by auditors at GM's suppliers, said Neil DeKoker, president of the Detroit-based Original Equipment Suppliers Association (OESA.)
An adverse auditor's opinion usually breaches the covenants of most loan agreements, which could seriously hurt many cash- strapped suppliers.
"If the bank wants to get you off their books, they can use it against you," DeKoker said in an interview.
"There are a lot of banks that don't want anything to do with automotive."
Suppliers have already seen their revenues collapse as automakers slashed production amid a deepening economic crisis.
The OESA and another major trade organization asked the US Treasury for 25.5 billion dollars in emergency aid last month.
The impact would likely be felt across the industry because the supply base is so highly integrated.
"People just see the sign and don't realize the extent everyone in the industry shares the same supplier base," said Bob Carter, Toyota Motor Sales vice president.
The auditor's warning on Thursday came as no surprise given that GM is currently funding its operation with the help of 13.4 billion dollars in emergency government loans and has asked for another 22.6 billion dollars in aid.
But it could be enough to trigger similar warnings by auditors at GM's suppliers, said Neil DeKoker, president of the Detroit-based Original Equipment Suppliers Association (OESA.)
An adverse auditor's opinion usually breaches the covenants of most loan agreements, which could seriously hurt many cash- strapped suppliers.
"If the bank wants to get you off their books, they can use it against you," DeKoker said in an interview.
"There are a lot of banks that don't want anything to do with automotive."
Suppliers have already seen their revenues collapse as automakers slashed production amid a deepening economic crisis.
The OESA and another major trade organization asked the US Treasury for 25.5 billion dollars in emergency aid last month.