Middle Market Suppliers: GM Bankruptcy Deal Must Protect Tier 2 and 3 Auto Companies

WASHINGTON, June 1, 2009: The Precision Metalforming Association (PMA) and the National Tooling & Machining Association (NTMA) strongly urged the U.S. government and bankruptcy courts today to ensure the continued solvency of middle market suppliers by requiring that Chapter 11 bankruptcy protection for General Motors Corporation include payment of outstanding accounts owed to their supply chain, particularly Tier 2 and Tier 3 suppliers of components and tooling.

"Tier 1 and Tier 2 suppliers need relief and a crucial element is for the government and courts to provide a 'safe passage' mechanism for our tooling receivables through the Tier 1 suppliers during this bankruptcy," said NTMA Chief Operating Officer Rob Akers. "Bankruptcy protection for GM must not be confined to guarantees for GM and its Tier 1 suppliers. The fate of tens of thousands of workers spread throughout the supply chain – and throughout thousands of communities across the United States – depends on fair treatment by GM, the U.S. government and bankruptcy courts."

"The federal government has spent hundreds of billions of dollars extending support to financial institutions, General Motors, Chrysler and large Tier 1 companies, but the benefits have yet to trickle down to the Tier 2 and Tier 3 supply chain companies," said PMA President William Gaskin. "We are not asking for a bailout. We are only asking that the government and the courts ensure that GM and its Tier 1 suppliers pay the money that is owed to Tier 2 and 3 companies. Typically lower tier suppliers to GM and Chrysler also make tools and components for Ford and even the new domestic auto manufacturers, so a cascade of failures at the Tier 2 and Tier 3 levels because their cash flow issues are not properly addressed could shut down the entire U.S. automotive industry.

"The thousands of small and medium sized manufacturers who make up the Tier 2 and 3 companies are vital to our economy and to an ultimately successful turnaround for the car companies," said Gaskin. "A recovery plan for GM is simply not viable unless the entire automotive supply chain – not just the Big 3 and the Tier 1 suppliers – is taken into account."