General Motors has struck a purchasing facility worth up to $4.5 billion to secure critical auto parts and shield its supply chain. A bank syndicate led by JPMorgan Chase and Banco Santander will prepay suppliers on GM's behalf, with GM repaying the debt by July 31, 2029.
DETROIT — General Motors has reached a purchasing facility of up to $4.5 billion designed to preserve cash while preventing the kind of supply disruptions that have hit automakers this decade. The deal keeps inventory costs off GM's balance sheet while locking in future parts supply.
Procura Auto Parts anchors the deal
The facility, disclosed in a public filing Tuesday, centers on a company called Procura Auto Parts, which specializes in sourcing rare or critical components. Procura will receive funding through the bank syndicate to prepay select suppliers on GM's behalf.
In return, GM will issue irrevocable payment undertakings, or IPUs, due no later than July 31, 2029. The automaker repays Procura only after it uses the parts in production, effectively deferring the cash outlay while still securing the supply.
How the accounting works
GM pays interest, plus an agreed-upon premium on what's used, as well as a customary annual fee on the unused portion during that year, according to the filing. The prepayments show up as an asset on GM's books, and each purchase gets recorded as unsecured debt, with cash flows presented as if GM paid suppliers directly.
These payments stay excluded from adjusted automotive free cash flow until GM actually buys the inventory. The company typically books the capital within 90 days of purchase, and GM established the arrangement with Procura and the banks on Friday, the filing said.
What parts, and why now
GM declined to disclose which parts the facility will target. Parts that have caused trouble across the automotive industry include semiconductor chips, dynamic random access memory, rare earths and wire harnesses.
The deal follows years of global supply chain disruptions and comes after GM and other automakers reevaluated their sourcing following U.S. tariffs and a push to move away from Chinese suppliers.
Source: CNBC
Trading involves risk.
Risk Disclaimer
