July 11, 2014 at 10:48 pm

Automakers, others pledge to help small suppliers grow

U.S. President Barack Obama is flanked by National Economic Council Director Jeff Zients, left, and White House Senior Advisor Valerie Jarrett as he meets with small business executives and suppliers in Washington, D.C., on Friday. (Olivier Douliery / MCT)

Washington — President Barack Obama met with two dozen companies Friday, including several major foreign automakers, that have agreed to help suppliers with access to financing — in a bid to help many small companies grow.

Obama met with executives from Toyota Motor Corp., Honda Motor Co., Nissan Motor Co., and Rolls-Royce North America, along with executives at Johnson & Johnson, Pacific Gas & Electric Co., Kelly Services Inc., Walgreens Co., Coca-Cola, Apple Inc., Lockeed-Martin Corp. and AT&T Inc., who have pledged to help their suppliers with financing.

The companies are agreeing to pay suppliers faster or offer them advances to ramp up production. Companies typically will agree to pay faster than the standard 30 to 45 days in exchange for a discount on the bill. The discount is typically less than a bank would charge to advance the money.

Obama announced “SupplierPay, a new partnership with the private sector to strengthen small businesses by increasing their working capital, so they can grow their businesses and hire more workers.” For some smaller suppliers, access to capital can be difficult to expand.

“Strengthening small business access to capital is a ‘win-win’ for small companies and us, their large customers. We recognize that we thrive when supply chains are healthy, when firms of all sizes are able to support our growth, investing in new ideas and new equipment, and creating new jobs,” the White House said in a fact sheet.

“While small firms have made momentous strides in recovering from the depths of the Great Recession, too many small businesses continue to struggle to access capital, including working capital, which creates a drag on growth and employment.”

The firms taking part pledged to provide working capital to small suppliers, agreeing to “take active steps to lower the working capital cost of small-business suppliers through either: Paying our small suppliers faster than we do today in order to reduce their capital needs or enabling a financing solution that helps small suppliers to access working capital at a lower cost.”

None of Detroit’s Big Three automakers took part, but were approached by the White House several months ago. It’s similar to a program unveiled in the United Kingdom in April setting up supply chain payment terms.

Honda last year purchased more than $23 billion in parts and materials from more than 530 U.S. suppliers across 34 states. In addition, Honda purchased another $10 billion in a wide variety of equipment, products and services from more than 5,000 maintenance, repair and operational suppliers.

Honda Executive Vice President Rick Schostek and Honda supplier Billy R. Vickers, president and chief executive officer of Dublin, Ohio-based Modular Assemblies Innovations, attended the White House event. Vickers’ firm employs more than 250.

“When the White House asked Honda to sign a pledge in support of suppliers that are small businesses, there was never a moment of hesitation, because the goal of supporting small business is vital to the success of Honda in America,” Schostek said in a blog post Friday. “We recognize that small business suppliers work on tight budgets with capital as a premium. These constraints can stifle growth, innovation and efficiency. Additionally, while smaller suppliers may have opportunities to improve their efficiency, they often lack the resources and expertise, which can put them at risk of falling behind their big business competition.”

Chris Ballinger, senior vice president and chief financial officer as well as executive vice president of the Americas region, at Toyota Financial Services, said that Toyota’s “Fast Pay” program includes hundreds of suppliers and that Toyota is committed to working with suppliers. Toyota helps suppliers locate near the company’s assembly plants.

Schostek noted that Honda was established in America in 1959 with less than $125,000 in working capital. With $100,000 of that going to purchase a small building in Los Angeles, “we actually had to borrow money to buy a truck to deliver our motorcycles to dealers. We have never lost sight of the challenges of doing business as a small company.”