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Office of the Vice President

For Immediate Release February 19, 1998


WASHINGTON: Vice President Al Gore and Administrator Aida Alvarez of the U.S. Small Business Administration (SBA) today announced an unprecedented agreement with the "Big Three" U.S. automakers that will increase subcontracting awards to minority businesses by nearly $3 billion over the next 3 years -- a 50 percent increase over current levels.

The agreement among SBA, General Motors Corp., Ford Motor Co. and Chrysler Corp. is an important public-private partnership that will improve opportunities for minority-owned small businesses in a major industry. It marks the first time an industrial group of this size and economic importance has engaged in a partnership with SBA.

"Right now, our economy is stronger than it has been in decades," said Vice President Gore. "As we move into the 21st Century, our challenge is to make sure that every individual, every business, and every community has a chance to thrive. That's why our new partnership with the Big Three is so significant and that's why the leadership of the auto industry will make such a big difference. By opening the doors of opportunity wider than ever before, we can prove that our growing diversity and our growing prosperity go hand-in-hand."

The agreement is spelled out in a Memorandum of Understanding (MOU) that builds on the automakers' current contracting efforts with minority suppliers. It represents a sharp increase in contract dollars flowing to small disadvantaged businesses (SDBs).

The MOU also provides new private-sector contracting opportunities for firms participating in the 8(a) business development program. The 8(a) program is helping about 6,000 SBA-certified disadvantaged firms, mostly minority-owned, compete in the economic mainstream.

SBA Administrator Aida Alvarez said: "I am very excited about this initiative. The agreement with the automakers will create expanded opportunities for an increasingly diverse small business community. The payoff will be more business for minority suppliers and more jobs and dollars in the communities where those suppliers are located."

The agreement is designed to:

Increase contract awards to minority and SDBs by nearly $3 billion over 3 years;

Provide new business opportunities for SBA-certified 8(a) firms;

Make more technical and developmental assistance available to SDBs; and,

Encourage strategic alliances between minority and non-minority suppliers.

SBA Administrator Aida Alvarez said that the auto industry agreement could serve as a model for similar pacts between small business and other industry groups.

SBA's agreement with the automakers involves first-level and second-level subcontracts (known in the industry as Tier 1 and Tier 2). It helps the automakers leverage their commitment to minority businesses by encouraging first-level subcontractors to increase opportunities for minority firms when they contract out. The agreement will benefit a wide variety of small firms that supply everything from nuts and bolts to advanced computer systems.

Specific Goals of the MOU:

General Motors will increase first-level and second-level subcontract awards to minorities and SDBs by $1 billion, resulting in first-level subcontract awards of $2.2 billion and second-level awards of $800 million by the third year of the agreement (the year 2000).

Ford will increase first-level and second-level subcontract awards by $900 million, resulting in first-level subcontract awards of $2.5 billion and second-level awards of $800 million by the year 2000.

Chrysler will increase first-level and second-level subcontract awards by $1 billion, resulting in first-level subcontract awards of $1.5 billion and second-level awards of $1 billion by the year 2000.

The automakers will assist SBA in its 8(a) business development efforts by sponsoring at least 10 minority executives annually in executive education programs. These individuals will attend schools such as the Amos Tuck School of Business at Dartmouth and the University of Wisconsin, for a total of 30 executives over three years.

The automakers also agreed to help improve opportunities for women-owned businesses by targeting marketing and outreach efforts to women-owned businesses in the auto industry.