The US taxpayer is dead last.
GM faces $250M past due notice
The bankrupt automaker can pay most parts suppliers. But HP, AT&T and ad
agencies not on 'critical vendor' list shouldn't expect GM checks in the
By Chris Isidore, CNNMoney.com senior writer
June 19, 2009: 3:30 PM ET
NEW YORK (CNNMoney.com) -- General Motors owes hundreds of millions of
dollars to major suppliers who have never made an auto part, rubber tire
or sheet of steel -- and they're not likely to get paid anytime soon.
GM is on the hook for more than $100 million for advertising it
purchased before filing for bankruptcy earlier this month. The list of
utilities who are GM creditors takes up 80 pages in its bankruptcy filing.
Among the company's top 50 creditors, 10 are outside the auto or
transportation industries. GM owes these firms just under $250 million.
But they have to take a back seat in the bankruptcy process.
While virtually all of the auto parts makers who work with GM are being
declared "critical vendors," which allows them to receive their next
payments by July 2, GM's other suppliers are not guaranteed payments
anytime soon. The company cannot make payments to them without approval
from the bankruptcy court.
"This is affecting many many different industries, far more than people
realize," said Heidi Sorvino, head of the bankruptcy practice in the New
York office of law firm Smith, Gambrell & Russell, who is representing
some of GM's suppliers.
The lucky vendors, those that will have a continued business
relationship with GM after it emerges from bankruptcy, are likely to
eventually get paid for their services once they renew their contracts.
But they may have to wait months before doing so.
Media buying firm Starcom Mediavest Group is GM's largest vendor
creditor. It is owed $121 million for ad time and space it purchased on
GM's behalf. That's about $11 million more than what GM owes Delphi, its
largest auto parts supplier.
GM owes three ad agencies a total of $46 million. Technology giant
Hewlett Packard (HPQ, Fortune 500) is owed $17 million, just a bit less
than the money it owes railroads CSX (CSX, Fortune 500) and Union
Pacific (UNP, Fortune 500) combined.
GM also owes AT&T (T, Fortune 500) more than it owes U.S. Steel (X,
Fortune 500) or any other steelmaker.
Several of these big vendor creditors outside the auto industry had no
comment about when they expected to be paid by GM.
Of course, none of these major companies are likely to face a cash
crunch if GM doesn't pay them in a timely fashion. But for many other
vendors, delayed payments could be a matter of corporate life and death.
"If you're a small supplier, and you live hand to mouth, you need that
check," said Sorvino. "You have your own operating expenses, payroll and
GM does not break down in its bankruptcy filing how much it owes to
critical versus non-critical vendors. But the company owed $18 billion
to vendors worldwide as of March 31. That means a lot of suppliers
probably won't get paid next month.
Sorvino said she expects widespread bankruptcies of smaller GM vendors.
That could lead to many workers losing their jobs who didn't even
realize they were depending on GM for their livelihood.
Worse off are suppliers who do not have a continuing contract
relationship with GM, but are currently owed money. Even if these firms
do work with GM again in the future, their previous bills make them
unsecured creditors. So they will be lucky to get pennies on the dollar
on what's owed to them -- and probably not for at least another year.
GM spokesman Dan Flores said the company has done what it can to help
vendors, particularly auto parts suppliers who depend on GM to stay in
"Unfortunately through this process there are suppliers that do not fall
into that [critical vendor] category," he said. "However, we are
continuing to work with them as much as we can."