DEFINITION of Auto Supplier Support Program — Auto SSP
The Auto Supplier Support Program was a $5 billion program funded by the U.S. Department of the Treasury intended to ensure the availability of parts to the U.S. auto industry. Due to the tenuous position of the large U.S. automakers in 2008 and 2009, the Auto Supplier Support Program (Auto SSP) was just one of many intended to help stabilize the financial crisis in the auto industry to give those companies time to restructure their operations. Both General Motors and Chrysler opted into the program.
BREAKING DOWN Auto Supplier Support Program — Auto SSP
The Auto Supplier Support Program was announced March 19, 2009. Under the program, the government substituted its own credit to certain qualified suppliers for qualified receivables arising from new auto production by the U.S. automakers. Because the financial demise of the auto makers was deemed imminent, suppliers were reluctant to extend credit to them, thus bringing production to a halt. For a fee, the U.S. government guaranteed payment to qualified suppliers, or would allow such suppliers to sell their qualified receivables for a modest discount.
Key Elements of the Auto Supplier Support Program
Some key elements of the Auto Supplier Support Program included:
- The program will provide suppliers with access to government-backed protection that money owed to them for the products they ship will be paid no matter what happens to the recipient car company.
- Participating suppliers will also be able to sell their receivables into the program at a modest discount. This will provide suppliers with desperately needed funding to operate their businesses and help unlock credit more broadly in the supplier industry.
- The program will be run through American auto companies that agree to participate in the program. Suppliers to those companies that agree to maintain qualifying commercial terms will have the opportunity to request this government backed protection. If granted, the supplier will pay a small fee for the right to participate in the program.
- The Treasury Department has made available up to $5 billion in financing under this program.
Eligibility for the Auto Supplier Support Program
Any domestic auto company was eligible to participate in the program. If a company decided to participate, they would request an allocation from the U.S. Treasury to provide government-backing and then work with a third-party servicer to establish a receivables purchase program. Auto companies were required to make a financial commitment in connection with the support received from the Treasury.
Any U.S.-based supplier that ships to a participating auto manufacturer on qualifying commercial terms was eligible to participate in the program. Decisions about which suppliers and which receivables would receive protection were made by the participating auto companies.