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Government Bail Out For Auto Parts Suppliers

Posted By admin || 20-Mar-2009

According to an article in the Dallas Morning News, the Treasury Department is providing a $5 billion bail out to nearly bankrupt auto parts suppliers who are dependent on Ford, GM and Chrysler automakers.

The article said:

The program will be run through U.S. automakers - General Motors, Chrysler and Ford Motor Co. - that agree to participate. Suppliers to those companies would have to agree to terms of the government-backed protection and pay a small fee for the right to participate.

The Treasury Department said General Motors and Chrysler have already agreed to participate. Auto companies would request funds from Treasury to provide government backing for the money and be required to "make a financial commitment in connection with the support received from Treasury."

Auto suppliers have been suffering for the past few years because Detroit's big three automakers have not been ordering large amounts of auto parts due to sagging sales. With the downturn, things have only become worst with 40 major auto parts suppliers filing for Chapter 11 bankruptcy.

And many more auto parts suppliers are on the brink of bankruptcy as auto parts orders from the big three automakers have literally slowed to a trickle. But if the effectiveness of past bail outs are any indicator of the effectiveness this bail out, we are simply delaying bankruptcy for these suppliers. Even GM which has received billions in bail out funds is looking to a possible bankruptcy scenario because they are struggling just to survive.

Maybe we should redirect our limited resources to more urgent needs like the millions of Americans facing foreclosures and job losses , because even with several bail outs behind us, both foreclosures and job losses continue to rise.

Categories: Economy
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