MEMA Urges Trump Administration Help with Supplier Liquidity as Many Face Insolvency

Date: May 22, 2020

In a letter signed by dozens of leading supplier executives, MEMA urged the Trump administration to engage with members of the Michigan Congressional delegation to specifically address the industry’s urgent liquidity issues necessary to successfully restart manufacturing.

“The motor vehicle industry supply chain is incredibly complex, and each level is critically important to the industry’s ability to manufacture vehicles,” said the letter, addressed to Secretary of Treasury Steven T. Mnuchin. “Past disruptions to the supply chain, whether a result of a factory fire or natural disaster, have led to temporary closures of supplier facilities and vehicle assembly plants. These closures demonstrate the integration within the industry and the potential domino effect of even a few suppliers facing insolvency.”

The letter emphasized that most small and mid-sized manufacturers were not eligible for Paycheck Protect Program funding and have been unable to receive financing through traditional means, leading to an urgent need for government action.

“A recent industry survey indicated that 21 percent of the supplier respondents have eight weeks or fewer before declaring insolvency,” the letter said. “Private funds will not be available to companies about to become insolvent, creating the need for government guarantees. As vehicle manufacturing resumes, these suppliers will have little ability to raise capital to pay for wages, raw materials, or other start-up costs, hampering the ability for vehicle manufacturing to return to this country. The current projections for supplier solvency assume a specific level of business recovery. If recovery is delayed or slowed, the number of companies facing financial insolvency will increase significantly.”

“The industry turns to you for assistance,” the letter concludes. “We urge you to use the financial tools available through the Main Street Lending Program to temporarily fill a void in our critical industry. This can be accomplished through a factoring program or a traditional loan program. By providing for a shorter loan duration, this funding should be available to the industry on favorable terms. These actions will provide for a more fulsome recovery in our industry and throughout the United States.”

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