On March 19, 2009, the U.S. Department of the Treasury announced the creation of the Auto Supplier Support Program (Program), which is intended to help stabilize the automotive supply base. The announcement provides some important information on the details of the Program, but leaves many questions unanswered. Below are highlights of the Program:
- Total size of the Program is $5 billion.
- Any “domestic auto company” (Participating OEM) is eligible to participate. Currently, General Motors Corporation and Chrysler LLC have agreed to participate and will be releasing additional details about suppliers’ participation in the Program.
- “U.S.-based suppliers” that are selected by the Participating OEM and that are on “qualifying commercial terms” with the Participating OEM may participate in the Program.
- Participating suppliers, working with their lenders, will be able to apply for government backing of eligible accounts receivable from a participating OEM or will be able to sell (factor) eligible accounts receivable to “third-party servicers,” for a “modest” fee or discount.
- The Program applies to accounts receivable generated from goods shipped AFTER March 19, 2009.
Further clarification will be required regarding the Program. In particular:
- What are the requirements to qualify as a “U.S.-based supplier”?
- What constitutes “qualifying commercial terms” with the Participating OEM?
- What fees or discounts will apply?
Foley’s Automotive Crisis Response Team will continue to review the requirements of this Program and will share additional details as they become available.
Legal News Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our automotive clients and colleagues. If you have any questions about this alert or would like to discuss this topic further, please contact your Foley attorney or any of the following individuals:
Mark A. Aiello
Steven H. Hilfinger
Judy A. O’Neill
Thomas B. Spillane
Ann Marie Uetz