The US motor vehicle parts supplier groups have submitted a formal request to the US Department of the Treasury seeking financial assistance of $18.5 billion as approx one-third of all suppliers are in imminent financial distress, which could possibly lead to one million workers losing their jobs.

Two industry groups representing US auto suppliers have made three proposals to alleviate their dire financial straits.

The three proposals are:

Government guarantee of supplier receivables from GM, Ford, and Chrysler so that suppliers are able to use their receivables as loan collateral with traditional lenders;

Institution of a "quick pay" receivables programme to increase supplier liquidity by accelerating accounts payable payments from GM and Chrysler to their suppliers; and
 
Government guarantees of commercial loans for supplier companies.

The request by the group comprises of federal guarantees of commercial loans and credit as well as collateral based on receivables.

A $10.5 billion government guarantee of supplier receivables from General Motors and Chrysler so that suppliers are able to use their receivables as loan collateral with traditional lenders.

The proposal also seeks $7 billion funding to GM and Chrysler under "quick pay" receivables programme so that they can make payments to their suppliers in 10 days instead of the normal 45 days and another $8 billion for supplier companies given as commercial loans backed by government guarantees.

Under all these three proposals, the group is actually asking the treasury for as much as $25.5 billion.

In December, the Bush administration bailed out struggling GM and Chrysler with $17.4 billion in emergency loans in order to save them from going bankrupt. (See: Bush offers $17.4 billion to bail out GM, Chrysler)

Both the auto makers are given a 17 February deadline to show the government they can be viable, failing which, the US government is likely to place the two Detroit companies in Chapter 11 bankruptcy protection in an effort to safeguard the $17.4-billion in loans extended to the two ailing car manufacturers.

The move, which is one of a range of options being considered by government advisers, would ensure that taxpayers would be paid out first in the event that either company actually collapsed. (See: Chapter 11 threat looms over Chrysler, GM)

Along with car manufacturers, auto parts suppliers have also been hit due to the tight monetary conditions where credit is hard to come by and nearly all car manufacturers have closed some of their plants due to a drastic slump in vehicle sales.

The proposal to the US Treasury also mentions that more than 40 major suppliers had filed for Chapter 11 restructuring in 2008, with industry surveys indicating that nearly one-third of all suppliers are in imminent financial distress and another one-third indicating that they will be in distress during the first quarter of 2009, which may potentially risk the jobs of nearly one million people.

According to Original Equipment Suppliers Association (OESA), there were 20,000 auto supplier companies in 1990, which has dwindled to less than 5,000, but still employs around 600,000 people.