Detroit gets a break but what about small suppliers?

By Deborah L. Cohen

CHICAGO (Reuters.com) -- Take a back seat in those new energy-efficient cars. That seems to be the prevailing attitude about the impact a $25 billion federal loan package destined for Detroit will likely have on smaller automotive suppliers.

The long-term loans were given the go-ahead by Congress last week in an effort to help the flagging U.S. auto industry with incentives to produce greener vehicles.

"It's mainly for manufacturing and technology development. As you get down through the Tier 1s (major suppliers), there are less and less opportunities," says Gregory G. Coppola, a senior director of BBK Ltd., a strategic consulting firm with an automotive presence. For small companies "the benefit is not the funding. The benefit to them is going to be if the (manufacturers) can sell more vehicles."

The details of the package are still being hammered out, yet the loans are intended primarily to help the automakers retool manufacturing plants to ready for hybrids and other energy-saving cars ahead of sharply higher fuel efficiency standards.

"The Big Three lobbyists are going to be in there with both feet to try to prevent access from foreign car makers and too many suppliers," says Jane Cahill, public affairs director for Foley & Lardner LLP, an international law firm with substantial automotive industry business. "The Big Three are going to fight for as much flexibility for the use of the money as they can."

Even so, Cahill adds that if a Tier 2 or Tier 3 parts maker has a dynamic part designed to help boost fuel efficiency, they should be encouraged to apply for the loans.

"A pot of money to a small supplier in the hundreds of thousands or millions of dollars means a whole lot more than $25 billion to GM," she said. "In general they should be available to anyone who is clever enough to follow the regulatory process and fill out the application."

But it could be a while before the money starts to flow. It is expected that the Department of Energy, which is managing the loans, could take at least six months and possibly as long as 18 months to set up the program and distribute the funding.