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DETROIT (Reuters) - News that the U.S. Treasury had pledged up to $5 billion in financing support to struggling auto suppliers sent shares in auto parts makers soaring on Thursday.
The price of Lear stock more than doubled shortly after the news, before slipping to $1.25, or 75 percent above the stock's Wednesday close on the New York Stock Exchange of 72 cents.
Shares in American Axle & Manufacturing Holdings Inc were up 48 percent, ArvinMeritor rose more than 19 percent, Tenneco Inc jumped more than 66 percent, TRW Automotive Holdings Corp were up more than 22 percent and Noble International Ltd leaped more than 57 percent.
The U.S. government bailout plan is designed to help auto suppliers survive a massive downturn in car sales.
Shares of General Motors Corp and Ford Motor Co also rallied on relief that the federal bailout of suppliers would stave off a disorderly failure of the supply base that could disrupt production at a time when the automakers can least afford it.
A failure of large suppliers would be very expensive to all automakers manufacturing in North America because of the interlocking chain of U.S. parts suppliers.
Shares of GM jumped 9.5 percent to $2.89, while Ford shares were up 1 cent to $2.46.
Major suppliers including Lear and American Axle each received warnings this month from auditors over their ability to continue as a "going concern" while Visteon Corp has warned it was in danger of breaching its debt covenants.
Lear said on Tuesday it may be required to file for bankruptcy protection despite winning an agreement with lenders that gives it until May 15 to restructure its debt-heavy balance sheet.
Reporting by Nick Carey and Soyoung Kim; Editing by Brian Moss