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October 10, 2009 (LPAC)—Two hundred out of 1,700 American automotive supply companies have been liquidated in 2009, and 650 more are at risk for Chapter 11 or liquidation in the near future, lacking business credit to continue operating. Seventy-five percent of metalworking/machine-tool manufacturing companies say they cannot secure sufficient credit for day-to-day operations, recapitalization, expansion, or retooling. The precision machine industry has shrunk its operations and employment by 40% in the past year; the auto supply industry, by 50%.

This testimony from the associations representing the largest U.S. manufacturing sector (the Motor and Equipment Manufacturers Association) and the most critical to technological progress (the Precision Machined Products Association) was part of a grim picture of shrunken and credit-starved American manufacturing capacity presented to Sen. Sherrod Brown's (D-OH) subcommittee Oct. 9. Both associations said that the Obama Administration's expanded Small Business Association (SBA) loan-guarantee authority under the stimulus act, which was supposed to transform this situation, has simply not been a factor at all. SBA has not backed any new auto-supply lending in Michigan this year, for example, said Robert Kiener of PMPA; he said SBA loan guarantees are now essentially on a "distressed loan" basis, requiring both the manufacturing assets and all the personal assets of the owner's family as collateral, so very few small and medium-sized manufacturers want them, even if they could get them.

MOMA (auto supply) representative David Andrea said the bank credit crunch hadn't gotten any better for his members in the Cash-for-Clunkers "recovery," and that, in fact, 25-50% had had credit further tightened against them in various ways in the third quarter. And machine-tool representative Robert Kiener said that banks don't think many manufacturers are "bankable," and think their regulators will downgrade them if they have too many manufacturing loans.

Kiener also said, "We understand some in the Administration .... believe we have an overcapacity in the manufacturing sector that requires more consolidation." Later he said he meant "the [White House] economic council, and the czars" of the Obama Administration.