The Hindu Business Line : GM’s parts suppliers to discuss future course

Chennai, Nov. 25 Indian auto component suppliers to General Motors Corporation (GM) in the US are meeting in Chennai on Wednesday to discuss the road ahead in the event of American auto maker winding up operations in North America.

This meeting assumes significance because of a clause in the agreement that the vendors sign while entering in to a supply contract, which ensures uninterrupted supply even if the customer files Chapter 11.

Close to 50 companies supply components to GM in the US from India. Some of the big names include Amtek Auto, Bharat Forge, Bill Forge, Maini Precision Products, Rico Auto, Sunbeam Auto and Sundram Fasteners.

Four suppliers from across the country under condition of anonymity confirmed that Indian suppliers to GM are meeting tomorrow in Chennai to discuss about the road map and, “how to go about it.”

GM recently announced the possibility of filing for bankruptcy and its attempts with the US Federal Government for a bail out plan. GM Europe is trying its mite seeking aid from Germany to avoid liquidity crunch if its US parent goes bankrupt. Similar attempts are being made with Belgium, Poland, Spain and the UK.

The issue to be discussed tomorrow is on certain clauses in the agreement that actually do not support the vendors if the procuring company files chapter 11.

The normal course is that once a vendor enters in to a supply contract with American company, the component manufacturer is governed by the US law. The payment will be made based on General Motors’ MNS 2 system under which a vendor will get his payment on the second day of second month after supplying. For example, for the components delivered in October, the vendor will get the payment on second working day of December.

If the sourcing company files Chapter 11, all payments will be frozen. However, the vendors will have to continue supply of components as per the supply schedule. Thereafter all the payments will be made by the Government after a period of time, which may vary from few weeks to few years.

Yet another worrying part is that neither the payment might be made full, nor as per MNS 2. Instead, the vendors fear they may get a portion of the payment after a year or two. In this scenario how the suppliers from India are going to manage, is the big issue. This will be discussed tomorrow.

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