GM Generali

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A U.S. House of Representatives Democratic leader urged more government aid for auto suppliers Wednesday, warning that the dramatic downturn in car sales could force half of the nation's suppliers to shut down by 2012.

Pending bankruptcy filings by parts suppliers threaten to further cripple major manufacturers like General Motors Corp. (GM) and Chrysler LLC, said Rep. Nydia Velazquez, D-N.Y., chairwoman of the House Small Business Committee.

"Strengthening and supporting small firms will be critical," Velazquez said at the opening of a hearing on parts suppliers. "Failure to do so will shrink the supplier base further, dealing a lethal blow to businesses like GM and Chrysler."

Parts suppliers employ 3.2 million workers, Velazquez said. "As the Big Three continue to slide, an alarming number of small firms are following suit," she said, adding that experts predict half of the nation's auto suppliers will be shut down by 2012. "Many have closed their doors already," she said.

Government programs to aid major manufacturers and larger firms known as "first-tier" suppliers have been insufficient, she said. Velazquez urged federal aid for smaller firms known as "second-tier" suppliers.

-By Josh Mitchell, Dow Jones Newswires; 202-862-6637; joshua.mitchell@dowjones.com