(Dow Jones)--General Motors Corp. (GM) and Chrysler LLC (C.XX) secured a combined $3.5 billion in U.S. federal aid to bolster suppliers under a program launched Wednesday.
The aid is limited to suppliers to the two companies, but its impact is expected to ripple through the industry as many auto makers source parts from the same manufacturers.
GM will oversee $2 billion under the Treasury program, with Chrysler securing $1.5 billion to stabilize payments to suppliers, many of whom are in, or on the edge, of bankruptcy.
Ford Motor Co. (F) declined to take part, stating that it can make supplier payments from its own funds.
The Treasury's supplier aid - which it billed as a $5 billion program - is designed to prevent collapse among companies suffering from a liquidity crunch as auto manufacturers pare production.
The program is expected to be short term, with users relying on the support for three or four months, according to a person familiar with the plan.
Suppliers are starting to apply to GM and Chrysler, and can opt to insure their accounts receivable or have the auto maker accelerate payments for parts in return for a fee.
"It is a voluntary program for suppliers and from our perspective there appears to be significant interest in the program," said Dan Flores, a GM spokesman. "The focus now is to get the program up and running as quickly as we can."
Chrysler said its program, administered by Citibank, is available to suppliers that are incorporated in the U.S.
However, one senior industry executive said it remained unclear how much relief the program would generate, citing the 3% fee being levied on federal loans used to accelerate payment.
"There is a real cost - 3% is quite a bit for these companies to pay to participate," said Jim Lentz, president of Toyota Motor Sales USA, Inc. on the sidelines of the New York auto show.
About two-thirds of Toyota's parts makers in the U.S. also supply parts to GM, Chrysler and Ford.
Lentz said 100 of Toyota's 500 top-tier parts suppliers are in some level of distress, and 12 are in severe trouble.
-By Jeff Bennett, Maya Jackson Randall and Sharon Terlep, Dow Jones Newswires; 248-204-5542,
jeff.bennett@dowjones.com
(END) Dow Jones Newswires
April 08, 2009 12:51 ET (16:51 GMT)