Michigan delegation urges Obama administration to help auto suppliers

David Shepardson / Detroit News Washington Bureau

Washington -- Michigan's 17-member congressional delegation wants the Obama administration to boost efforts to aid struggling auto suppliers and other manufacturers.

For more than three months, Michigan officials have been trying unsuccessfully to convince the Obama administration to back at least $1 billion in aid from the Troubled Asset Relief Program to help auto suppliers diversify into other industries. It's modeled after a pilot program by the Michigan Economic Development Corp., the agency that works with businesses hoping to locate or expand in the state.

Gov. Jennifer Granholm and others met in Detroit on the manufacturing issue with some of the top economic advisers in the administration, including Larry Summers, director of the National Economic Council. But despite the meetings, the Obama administration has repeatedly rejected the efforts.

In an Oct. 8 letter to Treasury Secretary Timothy Geithner and Summers, the Michigan delegation urged them to back plans to "create a fund to accelerate production in new economy sectors, such as green energy, homeland security and defense and medical devices."

"Businesses, which otherwise could keep Michigan workers employed by serving new customers, are instead shuttering their production facilities and laying off thousands," said the letter from Michigan's two senators, Carl Levin, D-Detroit, Debbie Stabenow, D-Lansing, and all 15 House members.

Rep. Sander Levin, D-Royal Oak, said in an interview Wednesday that he believed the administration was giving "serious consideration" to the proposal. An administration official said the request remained under review.

The MEDC recently broadened its proposal to a "National Manufacturing Diversification Financing Program," which would use private lenders as "the key underwriters and decision-makers."

In an Oct. 9 memorandum, Paul Brown, MEDC's capital markets director, said the program "is designed to help traditional manufacturers, especially auto manufacturers, transition and diversify into growing markets."

The state's pilot fund, which helps underwrite loans for small suppliers, has $12 million in state money and expects legislative approval for $20 million more.

He said Michigan has already received 300 inquiries seeking $150 million for its pilot program. "We estimate there is a total need of at least $1 billion in Michigan $8-$12 billion nationwide for these programs," Brown said.

The program would allow the government to purchase up to 49 percent of a loan and allow companies a grace period of 36 months on repayment. Companies could use the government support as collateral.

The proposal "will draw needed capital into the manufacturing sector and enable viable companies not only to survive, but also to prosper and contribute to the next generation of automobile and other advanced technology manufactured goods."

Michigan has 2,500 auto suppliers -- the most of any state -- and 60 percent of all U.S. suppliers have operations in the state.

In August, MEDC called for a $1 billion to $2 billion federal investment in a Michigan program "to prevent the loss of and/or to create 150,000 to 200,000 Michigan jobs."

While dozens of suppliers have sought bankruptcy protection, most suppliers have been able to obtain financing to restructure under court supervision. As a result, the administration has said it doesn't see a need for more credit for suppliers and other manufacturers.

MEDC said without federal help, "bankruptcy auctions will result across the nation, especially in Michigan, on the doorsteps of failed suppliers."

"The beneficiaries will be China and India, the most likely candidates to succeed the U.S. in supplying the automakers. They will use our old equipment, which they will have purchased at cents on the dollar," it said.

The Obama administration plans to roll out some new initiatives on manufacturing in the coming weeks. In September, it named Ron Bloom, its top auto adviser, as manufacturing czar.

dshepardson@detnews.com (202) 662-8735