Japanese Suppliers First in Line for Auto Supplier Bailout
Two Japanese auto-parts suppliers appear to be the first to ask the U.S. Treasury for some of the bailout funds set aside for auto suppliers, and the irony is intoxicating. Asian imports are one of the big reasons for the fall of General Motors and Chrysler. By introducing competitive products and streamlined production methods, Japanese automakers like Toyota and Honda exposed the weaknesses of the old-fashioned production-line system used by U.S. automakers.
But now, the reliance of both GM and Chrysler on these high quality parts from Japan threatens to take down the suppliers — Yazaki, a Tokyo-based auto-parts maker, and Yokohama-based Yorozu. Both companies have North American facilities in Michigan.
If successful, Yazaki and Yorozu would be feeding at the same trough as the beleaguered automakers. So far, supplier units from both GM and Chrysler have received $3.5 billion of the supplier money with GM asking for even more.
Throwing money at almost everyone tied to the auto industry is getting to be a habit and threatens to get sticky. We’ve already been warned that the supplier bailout is susceptible to fraud and other malfeasance, according to New York Assistant U.S. Attorney Neil Barofsky, who is serving the administration as a Treasury-based special inspector general. In his report of April 21, Barofsky says that he was briefed on the Auto Supplier Support Program shortly before it was announced in March and noted potential problems with the program.
One was “phantom receivables” — auto parts that are subject to TARP funding but never make it to the automobile manufacturers. The other was the program’s structure, which allowed the automakers to choose which suppliers can participate in the program — “effectively picking winners and losers with no clear restrictions,” Barofsky said in his report.
Despite these warnings, the program is in place and suppliers stand ready for a handout, one that promises a nice wad of cash these suppliers can rely on even if the distressed two — GM and Chrysler — file for bankruptcy.
Steve Miller has covered the auto industry, including product news, business issues and marketing, for Ward's Auto World, Brandweek and several other national media outlets.
BNET User Analysis