Federal Aid Request For Auto Suppliers On Temporary Hold

A request for $25.5 billion in federal aid for auto-parts makers is temporarily on hold after the U.S. Treasury Department asked for more information.

The government wants clarification on the different challenges facing both the larger and smaller suppliers to determine where best to provide help, according to two people familiar with the discussions. A timetable hasn't yet been set.

The request for more information comes after The Motor & Equipment Manufacturers Association, or MEMA, asked for funding earlier this month on behalf of 400 parts makers. The group said that without immediate assistance, the country would face "massive job losses."

Suppliers account for more than three-quarters of auto sector employment in the U.S., according to a Chicago Federal Reserve study, with staffing estimated at around 600,000 across the industry.

MEMA spokeswoman Ann McCulloch had no comment and said discussions with the Treasury Department are ongoing.

Such companies as American Axle & Manufacturing Holdings Corp. (AXL), ArvinMeritor Inc. (ARM), Lear Corp. (LEA) and Visteon Corp. (VC) have taken major financial hits as auto makers cut production in the wake of slumping sales both in the U.S. and around the world.

Ford Motor Co. (F) revised its U.S. industry sales outlook by 1 million units Thursday. It now expects overall sales to fall to as low as 10.5 million for 2009.

The suppliers want $8 billion in direct access to federal loans and $7 billion to create a "quick pay program" in which auto makers could pay suppliers within 10 days of receiving product instead of the traditional 45 to 55 days.

The auto-parts makers are also seeking $10.5 billion to guarantee receivables of suppliers whose customers have received federal loans, including General Motors Corp. (GM) and Chrysler LCC. A guarantee would allow for a pool of federal funds to provide a backstop for commercial lending losses on loans to suppliers. GM, Ford and Chrysler executives met with Treasury officials earlier this week and supported MEMA's suggestions, according to people familiar the talks.

-By Jeff Bennett, Dow Jones Newswires; [phone]; [e-mail]