Michigan governor says urgent aid needed for U.S. auto suppliers

DETROIT (Reuters) - U.S. auto suppliers will be in dire need of up to $8 billion in emergency government aid over the next few months, particularly if No. 1 U.S. automaker General Motors Corp enters bankruptcy, Michigan Governor Jennifer Granholm said on Tuesday.

GM faces a June 1 restructuring deadline imposed by the U.S. government and is widely expected to file for Chapter 11 bankruptcy over the next few days as the automaker's bondholders look likely to reject a deal to forgive debt in exchange for a 10 percent stake in a restructured company.

No. 3 U.S. automaker Chrysler LLC has been operating in bankruptcy since April 30.

"We need to provide the (auto) suppliers with the means to get through the next 60 to 90 days," Granholm said at a press conference in Detroit.

Flanked by Michigan Congressman Sander Levin and Ed Montgomery, who is spearheading efforts to help communities suffering from the U.S. industry's worst downturn in decades, Granholm said she has asked the administration of U.S. President Barack Obama for aid for suppliers.

She said that nationally there is an "unmet need" for $8 billion in aid for auto suppliers. Much of that aid will be needed in Michigan.

"Things are going to go dark for a while and it's that period of time that needs to be addressed," Granholm

said.

Levin said that Chrysler's secured creditors -- who balked at a government offer to exchange their $6.9 billion of Chrysler debt for $2.25 billion -- have learned that "bankruptcy doesn't provide any more relief and maybe less," a reference to the fact that secured creditors have found taking on Chrysler in bankruptcy court to be a tough proposition.

"We're also hopeful that bondholders of GM have also got that message," Levin said.

(Reporting by Nick Carey, editing by Dave Zimmerman)