AMT testifies on auto industry before House committee.

Press Release Summary:



In May 13, 2009, testimony, Carl Reed of Abbott Workholding Products, Inc., said that if small and midsize manufacturers ceased operations, it would create cross-industry domino effect. Reed also pointed out that auto supplier support program does not reach all of auto supply chain. Chapter 11 bankruptcy by General Motors could devastate supplier base, Reed said, and made plea to Congress/Administration that credit standards for Small Business Administration 7(a) loans should be loosened.



Original Press Release:



AMT - The Association for Manufacturing Technology Testifies Before U.S. House of Representatives Committee on Small Business



McLean, VA.... Testifying about the far-reaching effects of the auto industry's crisis on its supplier base, one manufacturing executive told the House Committee on Small Business that unless suppliers get help immediately, many of them will "take their last breaths."

Carl Reed, President and CEO of Manhattan, Kansas-based Abbott Workholding Products, Inc., testified May 13, 2009, on behalf of AMT - The Association For Manufacturing Technology, an association that represents many small and mid-sized manufacturers, a number of whom have ties to the domestic auto industry.

"Manufacturing technology suppliers are a small - yet critical - component to the production of next-generation automobiles," Reed said. "Without us, you can't manufacture an 'American-made' car."

But Reed warned that if a high number of those suppliers suddenly cease operations, it would set off a "domino effect" that will go well beyond the automakers and could affect aerospace and other industries - companies that other AMT members also supply.

While Reed applauded the Treasury Department's auto supplier support program, he warned that it does not go far enough to reach every part of the auto supply chain.

"Inexplicably, AMT Tier 1 suppliers have been left out of the program," Reed said. "The car companies have interpreted the program as protection for companies who supply them on a flow basis rather than on a transaction basis. This leaves out AMT suppliers whose commitments come one transaction at a time - amounting to essentially an 'all-or-nothing' agreement with the auto companies. There is no opportunity to adjust shipments based on health of customers or payment integrity as with the flow suppliers.

"I cannot believe that this is what the President's Auto Task Force had in mind when it created this program - but it is how the carmakers have chosen to administer it."

In a statement, Committee Chairwoman Nydia M. Velazquez said, "industry analysts estimate that more than half of North America's 1,200 small auto suppliers will be pushed into bankruptcies, mergers and liquidations within the next three years based solely on the current decline in sales ... the loss of these small parts manufacturers has the potential to cause a cascade of problems throughout the entire auto industry."

Reed issued particular caution against a structured Chapter 11 bankruptcy by General Motors, citing the devastation it would bring to the supplier base.

Reed said a recent survey of AMT members suggests that member manufacturing technology suppliers have between $1.2 billion and $1.6 billion currently tied up with the car companies in the form of contracts, works in progress, and receivables, averaging about $7 million per supplier. As such, a GM Chapter 11 filing without protection to AMT members would likely force many of those suppliers into bankruptcy as well.

Reed also made a plea that Congress and the Administration loosen credit standards for Small Business Administration 7(a) loans, particularly for small manufacturers tied to the auto industry, so that they can get the financing necessary to pursue new business opportunities. He urged Congress to shift the program so that there is less emphasis on cash flow as the primary consideration to instead also look at a company's backlogs, assets, employment levels, and historic performance.

While Reed emphasized that American small businesses have long proved themselves able to adapt to changing market needs, those tied to the auto industry won't be able to move forward without help. "Looking ahead, I urge members of this committee, the entire Congress, and the administration not to overlook manufacturing technology suppliers up and down the automotive supply chain ... each of our companies is fiercely competitive and determined to ensure that American manufacturing technology remains preeminent."

A complete transcript of the testimony is available at www.AMTonline.org.

AMT - The Association For Manufacturing Technology (founded in 1902 as the National Machine Tool Builders' Association) supports and promotes the U.S. manufacturing technology industry. The association provides U.S. builders of manufacturing systems with the latest information on technical developments, trade and marketing opportunities, and economic issues. It also gathers and disseminates information about world markets, promotes its members' products in those markets, and acts as a representative on manufacturing technology matters to governments and trade organizations throughout the world.

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