Insurers pull cover from GM and Ford suppliers

Troubled US carmakers General Motors and Ford Motor have been given a potentially devastating vote of no confidence by three big European credit insurers, which have removed cover from their suppliers.

The withdrawal of credit insurance - which covers suppliers against the risk of the car companies' failing - has previously hastened the demise of a string of European companies, with suppliers to retailers and construction companies finding cover increasingly hard to come by.

Euler Hermes, Atradius and Coface, which control more than 80 per cent of the world's credit insurance market, are refusing to write policies for suppliers trading with GM or Ford on credit.

GM and Ford are two of the biggest groups ever to be blacklisted. The cut-off of cover will primarily affect big operations in Europe, where the insurers do the bulk of business. US suppliers largely operate without insurance.

The move leaves three possible scenarios: GM and Ford can start paying upfront for goods; they can hope their suppliers will trade uninsured; or they couldbe unable to buy the parts they need for car production.