General Motors disclosed a $4.5 billion Master IPU Agreement designed to help maintain vehicle production during a crisis. Disclosed in an SEC filing, the program will secure critical inventory for retail and fleet vehicles in the event of disruptions caused by extreme weather, natural disasters, excessive demand, cyberattacks and other events.
According to the regulatory filing, General Motors will issue irrevocable payment undertakings (IPUs) to paying agent Procura Auto Parts. Procura will then advance funds to select suppliers to purchase and hold inventory on GM’s behalf.
A syndicate of banks that includes JPMorgan Chase will provide the funds to Procura, with GM backing the arrangement through its IPUs. Suppliers will store the parts until GM needs them.
The agreement provides for a 12-month funding period that began August 7, allowing a maximum of $4.5 billion in outstanding IPUs. GM will pay back the IPUs as it uses the inventory, with all payments due by August 6, 2029.
Interest will accrue on outstanding IPUs at a rate equal to the Secured Overnight Financing Rate, plus 1.55% annually. GM will also pay a 0.25% annual ticking fee on the daily average unutilized portion of the limit.
The development underscores GM’s efforts to protect production from unforeseen disruptions. For example, a global semiconductor shortage that plagued the automotive industry during the COVID-19 pandemic forced GM to announce production downtime at domestic and international facilities. Additionally, a shortage of Japanese parts following the devastating 2011 earthquake and tsunami led to GM temporarily halting production at a pickup plant in Louisiana.
