General Motors is offering its supplier partners upfront payments for contracts to help keep their businesses afloat during the COVID-19 pandemic.
According to Automotive News, GM will pay smaller suppliers upfront for bills that might typically take 40 or 60 days to process. The program allows Wells Fargo to send the payment for the work in full upfront, though the supplier still has to pay a financing fee, with GM then paying Wells Fargo for the loan at a later date. The financing is also linked to GM’s credit rating and not the supplier’s.
AN’s report says many suppliers received payment for work done prior to the COVID-19 shutdown just last month and that without such a program in place, they would not receive another payment until August. General Motors is also keen to help out suppliers as it prepares to roll out an abundance of new technologies, such as those found in its new line of full-size SUVs.
This program was actually introduced last August but is now being used to help out more suppliers amid the COVID-19 pandemic. Around 17 different suppliers have participated in this upfront payment program since last year, but another dozen or so are set to join on due to the current economic climate.
While these financed, upfront payment programs can help keep important suppliers afloat, they can also be more expensive than a line of credit. General Motors did not disclose the financial details of the program it is running with Wells Fargo, but one supplier told AN that many companies who take these deals usually have no other choice.
GM’s crosstown rivals at Ford have also implemented a similar program to help their supplier partners amid the pandemic, while Fiat Chrysler said it is using different strategies to help suppliers without going into further detail.