GM resists making early payments to US suppliers

By Robert Sherefkin (AN)

Automotive News

Detroit, Michigan -- General Motors Corp. is resisting pressure for early payments from a dozen suppliers concerned about the auto maker's ability to pay for parts.

GM has so far rebuffed requests from financially strapped suppliers seeking changes in their contract terms, said three people with knowledge of the situation. GM typically pays vendors within 35 to 45 days of delivery.

Consenting to the suppliers' appeals would further strain GM's cash flow. The company seeks $4 billion in short-term federal loans to avoid running out of cash this month.

"I suspect that these dozen suppliers are up against the wall the same way GM is," said John Henke Jr., president of Planning Perspectives Inc. in suburban Detroit and creator of an annual study on auto maker-supplier relations.

"If these suppliers are asking for payments because GM is holding back on money owed, that is one thing," he said. "But if suppliers are doing this to get cash upfront and ahead of others and draining GM, that is bad for GM and the industry."

The request for advance payments by a "small number" of suppliers was reported today by Bloomberg News.

"Despite the current economic challenges, GM remains committed to maintaining a strong, open relationship with our suppliers," said spokesman Dan Flores, who declined to comment on specifics. "GM remains focused on maintaining payment terms and being a prompt payer."

Last month, GM's Bo Andersson, group vice president for purchasing and supply chain, told Automotive News that none of GM's 3600 suppliers had asked for early payments or cash on delivery. Andersson made the comments two weeks after GM's Nov. 7 report of a fifth straight quarterly loss and looming cash crisis.

The US Senate rejected a $14 billion short-term rescue measure for GM and Chrysler LLC.

From Automotive News (A Crain publication)