General Motors has established a financial association with a company called Procura Auto Parts, which will serve as its purchasing agent and supplier for critical auto parts. According to the automaker’s Form 8-K financial filing, the “purchasing facility” is a three-year arrangement with a credit line of $4.5 billion: Procura will be a parts distributor to GM suppliers, but also handle working capital financing for those activities, and in the process it will oversee supply-chain risk management for General Motors.
The working relationship between the two will work this way: a) When a GM supplier has parts that GM wants secured, b) Procura will pay the supplier for those parts and c) hold them in inventory until GM requires them. Later, on a payment schedule, d) GM will reimburse Procura for its service.
Apart from the prolonged supply-chain disruptions ensuing from the Covid-19 pandemic, General Motors (among other automakers) was impacted by semi-conductor chip shortages starting in 2016.
The auto industry continues to manage a shortage of memory (DRAM) chips resulting from chip makers redirecting production from traditional automotive-grade memory toward High-Bandwidth Memory (HBM) products for for artificial intelligence data centers. Major automakers like GM and Ford are facing soaring component prices and multi-month lead times for infotainment, digital dashboards, and driver-assistance systems.
The shortage or rare-earth minerals and other materials needed for high-tech manufacturing remains an ongoing concern for automakers.
In addition to freeing General Motors’ working capital for other programs, the arrangement will ensure the automaker has critical parts available to maintain its assembly operations in the event of supply-chain disruptions, demand spikes, natural disasters, or other unforeseen interruptions.
Privately held Procura - which is described as a “third-party inventory management company” - is drawing its financing from JPMorgan Chase and Banco Santander, possibly from other banks. The company has been buying, selling, and managing commercial goods and material purchasing since 2015.
