WASHINGTON -- The nation's auto suppliers asked the Treasury Department for at least $18.5 billion in emergency aid Friday as the Obama administration was nearing an announcement of a three-member auto restructuring team.
The Motor & Equipment Manufacturers Association urged Treasury to quickly consider three options to prevent the collapse of auto suppliers, which face a severe cash crisis. The group is suggesting the government tap the $700 billion bank rescue program.
Detroit's Big Three automakers halted much of their production in late December and in January, amid sharply declining auto sales. That's put suppliers in a bind as they face bills to buy raw materials for production. Suppliers expect to receive $2.4 billion from U.S. automakers in March, down from $8.4 billion a month in the final three months of 2008.
Bob McKenna, president and CEO of the association, warned in a letter to Treasury Secretary Tim Geithner that 1 million jobs are at risk. "Without immediate financial assistance from the U.S. Treasury, the country will be faced with further major job losses and the eventual breakdown of an entire sector of our nation's economy," McKenna wrote. "The urgency of this request cannot be overstated."
A 57-page document from the association outlined three suggestions for relief:
Although the three proposals total $25.5 billion, there would be enough overlap between the quick pay and receivables guarantee options to keep the total cost to about $18.5 billion.
Auto production is expected to hit its lowest level since 1985 in the first three months of the year, suppliers said.
More than 40 major suppliers filed for Chapter 11 bankruptcy in 2008 and 130,000 supplier jobs have been lost, according to the supplier group's request to the government. Additionally, industry surveys have found that a third of all parts makers are in imminent financial distress and another third will be in distress during the first quarter.
Motor vehicle parts suppliers are the largest manufacturing employers in seven states, including Michigan, Ohio and Indiana.
"We've had some really good conversations with Treasury and now it needs to go to the next step," said Ann Wilson, a spokeswoman for the suppliers' association. "We're really getting down to crunch time.
Rep. Sander Levin, D-Royal Oak, said his staffers were in close contact with Treasury officials Friday on the auto suppliers' request for emergency federal aid. "It's one piece of this puzzle that has to be solved," he said.
The suppliers' request mirrors three options raised informally with Treasury in a Jan. 30 submission, including seeking $8 billion in direct loans from the $700 billion Troubled Asset Relief Program for 400 distressed suppliers.
The quick-pay program would use GM's and Chrysler's electronic payment systems. It would aid Ford Motor Co.'s suppliers as well, since 51 percent of Ford's suppliers also are GM's suppliers.
Talks between Treasury and suppliers continue, with Treasury officials in the TARP office seeking more information about the projected 2009 auto market in trying to assess how much aid to grant.
The urgent request comes as the Obama Administration tries to puts its auto team in place by Tuesday, when GM and Chrysler are to submit restructuring plans required under the terms of their $17.4 billion in government loans.
Steven Rattner, co-founder and managing principal at New York private equity firm Quadrangle Group LLC, remains a top choice for the auto czar, but the White House refuses to discuss other members of the team until a formal announcement is made.
Rattner is expected to be joined by two others, including Ron Bloom, a special assistant to the president of the United Steelworkers and a former investment banker, auto and congressional officials said. It is not clear who the third member would be.
Lawrence Summers, director of the National Economic Council, told Bloomberg News on Friday that the administration's auto team would be expanded. "We've had a number of strong people who've been working on this for some time and I'm sure that that group, as we get into analyzing a plan, will be augmented," he said.
Sen. Carl Levin, D-Detroit said "the Rattner name is the one we keep hearing" for auto czar.
He also acknowledged that Bloom has been mentioned in discussions with administration officials, along with other names he would not reveal. "My hunch is it ends up a person, one a czar, with two other deputies on a panel, but with (the czar) first among equals," Levin said.
The Treasury has retained two law firms and an investment bank to advise it in its oversight of the restructuring of GM and Chrysler.
Rattner, a former New York Times reporter, founded Quadrangle in March 2000 with several partners.
The private investment fund has grown into a $6 billion fund with investments in at least 20 media and communication companies.
Cerberus Capital Management LP, which is Chrysler's parent company, holds much of $125 million in debt used to finance Quadrangle's $250 million purchase of Alpha Media, which owns Maxim magazine.
Rattner told CNBC in October his firm wasn't an investor in auto stocks. He was asked about people buying GM stock when it fell below $5 a share.
"It would take a lot of courage to be buying GM when it was falling that day," Rattner said. GM closed at $2.65 a share Friday.