General Motors Reaches Multibillion-Dollar Parts Financing Deal to Secure Supply Chain

DETROIT — General Motors has reached a unique, multibillion-dollar parts deal as it aims to preserve cash and prevent supply chain disruptions like ones that have hit the global automotive industry this decade.

In a public filing Tuesday, GM said the up to $4.5 billion purchasing facility includes a company called Procura Auto Parts that specializes in sourcing rare or critical parts. It will receive funding through a bank syndicate led by JPMorgan Chase and Banco Santander to prepay select suppliers on behalf of GM.

In return, GM will issue formal promises called irrevocable payment undertakings, or IPUs, to pay back the company after it uses the parts in production, no later than July 31, 2029. The deal allows GM to keep inventory costs off its books, while better securing future supply.

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. For accounting purposes, the prepayments show up as an asset and each purchase is booked as unsecured debt, and the cash flows are shown as if GM paid suppliers directly, the filing said.

These payments are excluded from adjusted automotive free cash flow until GM actually buys the inventory. The company typically books the capital within 90 days of purchase.

GM declined to disclose what parts the company may be targeting. Problematic parts for the automotive industry have included semiconductor chips, including dynamic random access memory, rare earths and wire harnesses.