About the likelihood these programs will save smaller black-owned suppliers that may be facing bankruptcy, TAG Holdings’ Anderson says, “Some suppliers will benefit from the program, but some will not if they have too much fixed costs and too much banking debt.”
The Detroit-based Michigan Minority Business Development Council (MMBDC) has among its members about 130 African American-owned automotive suppliers that gross more than $10 million a year. MMBDC president Louis Green believes that, as implemented, only a handful of these black-owned automotive suppliers will be able to take advantage of the Auto Supplier Support programs.
“I think it will do little or nothing for black-owned businesses,” Green says. First, the program is only for direct parts suppliers, and only about 80 African American MMBDC firms directly supply automakers the parts that go on vehicles.
Second, it’s expensive. “It can cost somewhere around $35,000 per $1 million in insurance. You have some minority auto suppliers that may have $10 million in receivables, so paying $350,000 a month for insurance is an untenable situation for them,” Green says.
Green is highly critical of the program. “There was little or no input from black automotive suppliers to this program. There are some distinct and definite needs that are there, but they’ve gone unheeded by the administration with this plan. This plan got the input of the large, nonminority auto suppliers, and to no one’s surprise, this plan benefits the large, non-minority auto suppliers.”
Layoffs of 40% are not uncommon among his organization’s black-owned automotive suppliers, Green says, and a third of them probably face bankruptcy in the next 90 to 120 days. “If either GM or Chrysler files bankruptcy, we could lose 60% to 70% of those black automotive suppliers. The next 30 to 60 days are going to be critical for black automotive suppliers,” Green says.
“A strong supply base is necessary for GM to successfully restructure,” says GM’s Flores, who urges eligible minority suppliers to participate and take advantage of this opportunity. “This is a program that will help our suppliers through this very difficult time right now, as we are restructuring. We hope as we work our way through this, that we are going to be successfully restructured and demand for products is going to pick back up. That will be the medicine needed for the industry. With greater volumes comes more health not only for GM, but for our supply base,” says Flores.