Auto Industry To Push Congress For $50B In Loans

WASHINGTON — Auto industry allies hope to secure up to $50 billion in government loans this month that would pay to modernize plants and help struggling car makers build more fuel-efficient vehicles.

With Congress returning this coming week from its summer break, the industry plans an aggressive lobbying campaign for the low-interest loans. The situation is growing dire after months of tumbling sales, high gasoline prices and consumers' abandoning profitable trucks and sport utility vehicles.

Lawmakers authorized $25 billion in loans in last year's energy bill to help the companies build fuel-efficient vehicles such as hybrids and electric vehicles. With credit tight, automakers and suppliers now want lawmakers to come up with the money for the program _ and expand the pool of money available to $50 billion over three years.

Industry leaders have argued that the loan guarantees are not a government bailout because it would hasten production of fuel-efficient vehicles and reduce dependence on imported oil.

"This is not about benefiting Wall Street," said Ford Motor Co.'s President of the Americas Mark Fields, referencing recent federal support for the investment firm Bear Stearns and troubled mortgage companies Fannie Mae and Freddie Mac. "This is benefiting Main Street, the working men and women. The auto industry is part of the backbone of the U.S. economy."

The low-interest loans, at rates of about 4 percent to 5 percent, would pay for up to 30 percent of the cost of retooling plants to build hybrids, plug-in hybrids, electric cars and other alternatives.

Ford and General Motors Corp.'s credit ratings have fallen below investment grade, making it difficult for the companies to borrow money at affordable rates. Chrysler, which has been heavily dependent upon truck sales, has been privately held since last year and faces similar problems accessing capital.

"This industry could fall down, literally, or be absorbed if they don't get something in place very soon. I think it's that severe," said Rep. Joe Knollenberg, R-Mich. "Something has to happen pretty quickly because they can't compete paying 15 to 20 percent (interest)."

Story continues below

advertisement

Industry lobbyists pressed the issue at the recent presidential conventions in Denver and St. Paul, Minn., and members of Michigan's congressional delegation have talked to legislative leaders and the Bush administration about the program. Discussions surround a three-year plan that would make $25 billion in loans available in the first year, followed by $15 billion the second year and $10 billion in the third.

To provide $50 billion in loans, Congress would need to set aside about $7.5 billion to guard against a loan default.

Automakers want to secure the money for the loans before November's election because a new president and Congress could delay the companies' ability to access the loans.

The White House said last week it was talking to members of Congress and the industry about the financing. The issue, meanwhile, has gained a foothold in the presidential campaign in states with many auto workers such as Michigan and Ohio.

Democrat Barack Obama has criticized Republican rival John McCain for not supporting the full $50 billion loan program. McCain said last week he supported fully covering the $25 billion loan program in the energy law.

Congressional leaders have said they are open to an expanded program. But the industry will face a compressed schedule in an election year when many lawmakers will push to leave Washington so they can campaign for re-election this fall.

"We're hopeful that we're making an effective case to get this done between now and the end of this session," said John Bozzella, Chrysler's vice president of external affairs and public policy.

The loans would be available to foreign automakers, but the companies are not expected to seek the money because they are in a better financial situation and priority would be given to companies with plants 20 years or older.

Comments

[kwright]

AS a former Detroiter I felt compelled to throw that out there. We left Michigan in 1990 due to lack of any future there. I think it was a good decision. I do feel for the folks back home. No jobs, no prospects, and anything having to do with the auto industry is long gone. People do not realize how many other small businesses were connected to the Big Three.

[darthdarcy]

More Socialism for the Rich..!

Try building cars people want to buy and are affordable..!

A Single Payer Health Care System would help Detroit more than any bail out give away or $50 billion dollar loan..!

[Mogamboguru]

Don't throw good money after the bad money.

The US-carmakers are 15 years behind scedule, compared to japanese and european carmakers.

Shut the big three down and ask those, who know, how to build fuel-efficient cars already, to build more factories within the USA. This won't cost the tax payer one single dime, but will yield top-results within three yeas from now.

That's how capitalism works, and this will do the job this time, too. Anything else is socialism - i.e. publicly supported manufacturing.

[ErnestineBass]

/sarcasm ON/

Hey, after we bailed out Chrysler everybody in America ran right out and bought one!

/sarcasm OFF/

[KillTheMessenger]

Just let them fail. Toyota and Honda can do everything the US companies can do, but better, cheaper and faster. We don't need a US auto industry. It has not served us well.

[torrrep]

I worked at Honda for 5 years. It was so efficient it was unbelievable. We made very good money and wonderful benefits. And we were WAY cheaper than the UAW. Americans complain about wanting better jobs. Then they get them and they run their companies into the ground or force the to move over seas because of their unrealistic pay and benefit demands. Yet they blame the government. You are correct. Let the Big Three fail.

[WASanford]

This feels funny, Killer, but I agree with you on this one. In 1992, I bought a Ford F-150. It was made in Mexico and the paint began peeling off of it before I could drive it home from the dealership. Ford's president is lying when he says that this loan program would help "main" street. The cars they sell us are made in other countries.

If our government does this, we should make the loans contingent upon the fulfillment of our demands. They have to build their products HERE. They have make only cars that get 63 MPG* or more.

* Ford showed their Fiesta at the London auto show that gets that mileage with a small displacement turbo diesel. Ford will make a gas version in America. That's not good enough!

[kwright]

Part 2- Not sure of how to utilize that information, but wanting to prevent another loss to the Japanese, the rowing team's management structure was totally reorganized to 4 steering supervisors, 3 area steering superintendents and 1 assistant superintendent steering manager. They also implemented a new performance system that would give the 1 person rowing the boat greater incentive to work harder. It was called the 'Rowing Team Quality First Program,' with meetings, dinners and free pens and a certificate of completion for the rower. There was discussion of getting new paddles, canoes and other equipment, extra vacation days for practices and bonuses. The next year the Japanese won by two miles.

Humiliated, the American management laid off the rower (a reduction in workforce) for poor performance, halted development of a new canoe, sold the paddles, and canceled all capital investments for new equipment. The money saved was distributed to the Senior Executive s as bonuses and the next year's racing team was "out-sourced" to India... Sadly, the End.

However, sad, but oh so true! Here's something else to think about: Ford has spent the last thirty years moving all its factories out of the US, claiming they can't make money paying American wages. Toyota has spent the last thirty years building more than a dozen plants inside the US.

Fiscal 2006 results: Toyota makes $11 billion in profits while Ford racked up $12.6 billion in losses. Ford folks are still scratching their heads.

[ErnestineBass]

BRAVO, kwright!

WELL DONE!

[torrrep]

Wow. That was excellent.

[kwright]

- A Modern Parable part 1

A Japanese company (Toyota) and an American company (General Motors) decided to have a canoe race on the Missouri River . Both teams practiced long and hard to reach their peak performance before the race. On the big day, the Japanese won by a mile.

The Americans, very discouraged and depressed, decided to investigate the reason for the crushing defeat. A management team made up of senior management was formed to investigate and recommend appropriate action.

Their conclusion was the Japanese had 8 people rowing and 1 person steering, while the American team had 8 people steering and 1 person rowing.

Feeling a deeper study was in order, American management hired a consulting company and paid them a large amount of money for a second opinion. They advised, of course, that too many people were steering the boat, while not enough people were rowing.

[Mike169]

Funny how often big corporations run to the government for help when they're in trouble. Isn't this the opposite of capitalism?

[ErnestineBass]

Yes, it is.

It's called communism.

[esgabel]

American Auto makers fought innovations--yet they want taxpayer money. They laid off more and more American workers, sending jobs overseas and buying foreign steel and parts...again, how much are all these eecutives making with their platinum parachutes???

[dadw5boys]

MAYBE ALL THOSE MILLION DOLLARS BONUSES SHOULD HAVE WENT INTO A BANK ACCOUNT INSTEAD OF PAYING THEM OUT TO ONLY A SELECT FEW !!!!!!!!!!!!!!!!

[TheJibreelaMonsters]

Dont worry this will come out at something Uber Bi-Partisan for Congress. The Two Dems from Michigan along with the other states that have Domestic Auto Plants (WI,OH, NY, KY, IN/ three of those are "swing states") this government will not allow this them to fail.

GM can make all the Hybird SUV they can make because PEOPLE WANT TO BUY THEM silly!
SUV will only go the way of the Muscle Car and you know how that is going
I'm in the market for a SUV
Lake Affect snow is the Reason!

[CassandraPriam]

They have screwed the American public for decades
and refused to look at energy efficient vehicles.
Now we have to bail them out.

[researcher]

modernize plants

anyone that knows anything about the auto industry in america knows it is about leadership not moderization of the plants

american style of management is results only oriented ie sub opt

the end is near for american auto industry

it will be an asian century

this nation is bankrupt now

economic decline is upon us

we are in denial

dont want to give up super power status

only thing left for us to brag on

[KillTheMessenger]

It would have been better as a Haiku. But at the core its sadly true.

:-)

[indypete]

How about the interest from the loan payments going to the people putting up the money... we the taxpayers? But, no, our tax dollars will be made available and the bank CEOs and car company CEOs will split up the interest among themselves.

[researcher]

it is called capitalism want to give that up

did not think so

[DrYRHead]

The US needs to hire all those lay-ed off auto workers to make more of those wind-mill generators. Other auto-workers can/should be getting to work on electric cars. The technology is already there.
Those hybrid cars are just such a half-ass answer to the solution.