ACEA

Automotive suppliers need access to finance to get through the crisis

In the wake of the financial crisis, automotive suppliers lack access to liquidity as commercial banks and credit insurers have sharply reduced their activities in the sector, and demand for new vehicles has dropped. The situation puts viable companies at risk that had solid finances before the crisis. Vehicle manufacturers have been supporting their suppliers, but their means are limited in times of crisis. The EU needs to step in quickly to restore sufficient access to finance.

Despite falling sales and revenues, suppliers - just as manufacturers – still need capital for their daily operations and for funding investments in new programs, notably to meet the strict regulations on CO2 and other emissions in coming years. The automotive industry already spends more than € 20 billion on research and development every year, making it the largest private investor in R&D in the EU.

The necessary credit is currently either not available, or only at very high prices. This year, manufacturers and tier 1 suppliers* have already spent about € 2-3 billion to help suppliers further down the supply chain in financial difficulties.  However, they, too, are suffering from the demand slump and lack of financing, while having and wanting to sustain large investments.

The summer months will be especially critical. Many assembly plants will shut down for extended holiday periods to adapt production to demand. This leaves suppliers without revenue for a longer period as well. They still have to bear costs over the summer, such as for personnel, while banks and credit insurers no more provide financing to bridge such periods.

The likely result will be a large number of bankruptcies, disrupting the entire supply chain and damaging the resources and innovation potential needed to develop new technologies for lower-carbon transport.

Public support is therefore urgently needed to restore access to finance comparable to pre-crisis levels and prevent the collapse of viable suppliers. It needs to be available across the EU, as the supplier base is truly pan-European and strongly cross-linked. EU-wide support will also avoid fragmentation of the internal market and distortion of competition through individual, uncoordinated Member State measures.

*Tier 1 suppliers deliver their products directly to manufacturers, tier 2 suppliers deliver mostly to tier 1 suppliers, tier 3 suppliers to tier 2, and so on.

last updated 18/08/2008

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