Nydia M. Velázquez, Chairwoman
May 13, 2009 (202) 226-3636
Lawmakers Say Auto Help Should Extend to Small Firms
Congressional Panel Told Auto Suppliers Key to Strong Economy
"As automakers fight to stay afloat, countless small parts providers nationwide are caught in their wake," said Rep. Nydia M. Velázquez (D-NY), Chairwoman of the House Small Business Committee. "These small manufacturers not only employ millions, but they sustain the auto industry we are trying to save, and their plight cannot be overlooked."
The average car is made up of 30,000 parts produced by 4,000 small businesses comprising the $200 billion auto supplier industry. Lawmakers heard how the multi-tiered auto parts supplier network employs over 700,000 people, with nearly 2 million more jobs in related industries that would be impacted if these small manufacturers are forced to close their doors. In fact, auto suppliers warned the panel that as the "Big Three" continue to slide, an alarming number of small firms are following suit, with experts predicting half of the nation's auto suppliers will be shut down by 2012.
"Without help to bridge this crisis, small multi-faceted manufacturers that depend on a steady cash flow from automakers will fail," Velázquez said. "Auto supplier aid needs to be deep enough and comprehensive enough to reach these small businesses."
During the hearing, lawmakers were told about the vast role small manufacturers play outside of the auto industry, providing vital components for the plastics, aviation, energy, and medical fields. If these small ventures are forced out of business, the effects would be felt throughout industries across the country.
"When a small manufacturer goes under, it sparks a ripple effect that resonates throughout the entire economy, shrinking a supplier base even further that can undermine large businesses like GM and Chrysler," Velázquez said. "If small manufacturers are cut out of the auto restructuring process, the result will only be further setbacks and large scale job losses that reach far beyond the auto industry."
In March, the Treasury Department announced the Auto Supplier Support Program for participating firms, and the Obama Administration recently expanded Small Business Administration (SBA) loans for major suppliers locked out of credit markets. Witnesses told lawmakers that expanding comprehensive aid such as federal loans beyond first tier manufacturers would go a long way toward helping entrepreneurs like them stay afloat as the auto industry restructures.
"It is critical that any restructuring accounts for small suppliers. Proposals to aid second tier manufacturers, for example, would go a long way," Velázquez noted. "Regardless of how the auto overhaul takes place, one thing is certain: it needs to be deep enough and comprehensive enough to reach small businesses."
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Click here to view video from today's hearing.