Auto 'recovery' tainted without supplier payment

April 5, 2009
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President Barack Obama last week lifted from the fog of debate the ground rules of engagement for a federal bailout of General Motors and Chrysler. And as one in 10 American workers tied to the auto industry hold their collective breath over the abilities of the industry executives, one can almost hear the refrain of the old Chevy “Heartbeat of America” commercial.

Law, accounting, banking and other services firms are certainly as tied to the drama as those manufacturing glass or tires. Comerica Bank understood that three years ago and left for Dallas.

So it should not be necessary to point out the importance of including those businesses that supply the Detroit Three insofar as to assure that they are paid. It should not be necessary to make that point, but it is.

Grand Rapids Business Journal reports this week on increasing payment declines to West Michigan Tier 2 and 3 suppliers — if they are receiving payment for goods produced at all. Trade associations like the National Tooling & Machining Association, given leadership by local company owners, have repeatedly asked — or begged — the Big Three to assure their Tier 1 suppliers pay them, but to no avail. The Detroit three have declined to exert such pressure on Tier 1 suppliers such as Delphi.

The Tier 1 suppliers are likely to be the direct beneficiaries of the federal Troubled Asset Relief Program targeted to automotive suppliers, not the lower tiers. Obama’s new taskforce, the Recovery for Auto Communities and Workers created last week, must certainly be made aware of the industry patterns creating current anxiety, lest this, too, becomes akin to the flagrant greed flaunted by AIG and financial institutions with taxpayer money.

The report on page 1 notes that some suppliers have waited more than a year to be paid for significant jobs. The tool-and-die industry representatives noted they are being used by the Tier 1 companies to “finance” purchases. Tier 1 suppliers have held up payment until they get “final approvals” on parts already received, which can drag on indefinitely. Some of those Tier 1 companies have decided they will not pay for parts already supplied until the year in which those parts are used. Shenanigans. All of it.

Such practices are especially cruel when one considers that most of the Tier 2 and 3 suppliers are the small business backbones of the local economy, and while they have maintained cutting-edge systems and supplies, there are fewer resources than provided for the Tier 1 companies.

Obama’s auto recovery taskforce must include oversight to prevent the debacle now taking shape in West Michigan.

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