GM and Chrysler launch supplier aid

By Soyoung Kim and David Lawder

DETROIT/WASHINGTON (Reuters) - General Motors GM.N and Chrysler on Wednesday launched programs to help cash-strapped parts suppliers, backed by up to $5 billion (3.4 billion pounds) in U.S. government funds.

The news sent shares of major auto parts makers climbing, with American Axle & Manufacturing Holdings (AXL.N) up more than 6 percent and ArvinMeritor (ARM.N) up nearly 14 percent.

The U.S. Treasury, which last month pledged up to $5 billion to support battered auto parts suppliers, said the programs will guarantee receivables owed to the companies for any parts shipped to GM and Chrysler after March 19.

Chrysler said it would tap $1.5 billion from the government credit line and provide $75 million of its own capital, under a requirement that any participating automaker should provide 5 percent matching funds to the government money.

Suppliers deemed critical to GM's operations have been allocated $2.1 billion to be distributed through the automaker, with the government supplying $2 billion and GM putting in $100 million, the automaker said.

Citigroup (C.N) is working with GM and Chrysler to determine how to distribute the funds to suppliers.

"The U.S. Treasury Department is pleased that both GM and Chrysler have moved quickly to launch supplier support programs," Treasury spokeswoman Jenni Engebretsen said in a statement.

"These efforts, backed by U.S. Treasury resources, will help stabilise the auto supply base and restore credit flows in a critical sector that employs more than 500,000 American workers across the country."