Auto parts suppliers need federal aide: APMA

Last week, we reported that Angelo Carnevale, vice president of the Canadian Association of Moldmakers, had spoken in front of the Automotive Sub-committee of the House of Commons earlier this month. The subcommittee also heard from automotive parts manufacturers, another major stakeholder in the current crisis facing the sector/

Gerry Fedchun, the president of the Automotive Parts Manufacturers Association (APMA), spoke on behalf of suppliers and assemblers on March 5 in Ottawa.

Fedchun stated that suppliers appreciate the measures taken by the government to date to stability important OEM customers and the liquidity measures in the federal budget. But he also noted that circumstances have continued to deteriorate dramatically for suppliers as the economic crisis worsened.

The APMA asked for three things of the government. The first, and most important, was to ensure that the industry’s customers (assemblers) are able to pay suppliers in the normal course.

“If just a few major suppliers go down, shortly thereafter all of North American production will come to a grinding halt and many months will pass before the survivors are back up and running again,” said Fedchun. “The cost would far exceed the cost of assisting GM and Chrysler now.

“In this situation, ‘a stitch in time saves 9,’ is a very relevant saying,” he continued.

Fedchun also explained that the auto industry in North America was practically shut down from mid December to the end of January, resulting in very slim payments to the parts industry. Additionally, February production is better but still slow, and small payments will continue.

“This means good suppliers are running out of cash,” he said. “Suppliers can’t go to the bank and borrow on accounts receivable because banks will not take it as collateral. Suppliers can’t borrow on machinery as collateral because it is mostly idle and there is no market for it. This is a real squeeze.”

Additionally, Fedchun asked for receivable insurance from EDC/BDC at reasonable rates, and direct assistance for many suppliers similar to what assemblers have received, citing a 30-40 year production low.

“Many good suppliers cannot survive much longer,” he noted. “They need the money that is in the budget now. We need to pass the budget and release the funds or the supply base will be decimated. Even suppliers that survive now may not be able to afford to buy raw materials and pay employees to produce goods when production ramps up.”

Fedchun emphasized the point that North Americans are not changing their habits, and will continue to buy new forms of personal transportation. He noted that parts sector has weathered previous recessions, but this one is significantly different.

“We have been through recessions before and emerged stronger but this time suppliers went into this recession with less money in the bank because sales have been declining for two years, and shrinking profit margins depleted suppliers’ cash reserves,” he said.

The House of Commons’ subcommittee also heard from several other stakeholders, such as vehicle assemblers, dealers associations and other industry associations. The committee is expected to report its findings by the end of this month.