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U.S. Treasury Establishes Auto Supplier Support Program

March 26, 2009
by: Jeffrey A. Breen, Esq.

On March 19, 2009, the U.S. Treasury announced the creation of the Auto Supplier Support Program (the Program) which is aimed at stabilizing the auto supply base. The announcement highlighted several key aspects of the Program including the following:

  • The Program will “provide selected suppliers with financial protection on monies they are owed by domestic auto companies and the opportunity to access immediate liquidity against those obligations.”
  • The Treasury Department has allocated $5 billion in financing under the Program. The financing is made available through the government’s Troubled Assets Relief Program.
  • All domestic auto companies are eligible to participate in the Program. Both General Motors Corp. and Chrysler LLC have announced that they will participate in the Program. Ford Motor Co. has announced that it will not participate.
  • Only U.S.-based suppliers that ship to participating manufacturers on “qualifying commercial terms” are eligible to participate. Unfortunately, the announcement did not include a definition of “qualifying commercial terms.”
  • Decisions about which suppliers will be able to participate will be made by the participating auto companies.
  • All receivables related to goods shipped after March 19, 2009 that are made on “qualifying commercial terms” will be eligible for the Program.

We understand that the U.S. Treasury expects to release further guidance on the Program during the first week of April. We will issue a follow-up Client Alert when further information is made available by the U.S. Treasury. 

This correspondence should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult a lawyer concerning your own situation and legal questions.
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