US Big 3 to get welfare checks UPDATE #3 This rumor is upgraded to 'strong' today. General Motors Corp., Ford Motor Co., Chrysler LLC and their suppliers would be able to borrow $25 billion from the U.S. government to develop more fuel-efficient vehicles according to a draft of year-end spending legislation lawmakers are set to consider later this month.
The draft measure allocates $7.5 billion to fund the low- interest loan program, which was authorized in energy legislation last year. The money is allocated in a draft of House legislation called a continuing resolution, which temporarily pays for government operations until Congress completes work on its annual spending bills.
Chief executives of the three automakers met with congressional leaders last week to press for funding of the loans to help them revamp their vehicle lineups.
``Our companies are committed to transforming our businesses and making major investments in the U.S. to produce these new fuel-efficient vehicles,'' GM's Rick Wagoner, Ford's Alan Mulally and Chrysler's Robert Nardelli wrote to House Speaker Nancy Pelosi Sept. 16.
Pelosi has called the loans ``a way to rebuild and strengthen the technological base of America'' and said funding for the program may be in the year-end spending measure. A spokeswoman for the House Appropriations Committee didn't immediately return a call seeking comment.
The bill also would allow drilling for oil and natural gas on the Outer Continental Shelf beyond 100 miles. States could permit drilling between 50 miles and 100 miles. The provision, passed by the House in a broad energy bill Sept. 16, would alter a congressional moratorium on drilling off the Atlantic and Pacific coasts and in parts of the Gulf of Mexico that has been included in spending bills since 1982. Bloomberg09/08/08 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. Detroit News 09/03/08 The White House said Tuesday it was in discussions about a proposal to give the auto industry $25 billion in government-issued low-cost loans, a sign that automakers may be making progress in their effort to get financial assistance.
"It's something we're aware of and we're talking to the members of Congress and also the people in the (auto) industry, and thinking about what they might think would be required from their perspective," White House spokeswoman Dana Perino said at a press briefing Tuesday. She said she wasn't prepared to say what funding amount "the White House would or would not support," noting "there's a lot of details that go into something like that."
Perino said the White House may say whether it supports the proposal in the next day or two.
The energy bill that was signed into law in December by President Bush included a provision to provide $25 billion in direct loans to automakers, but the bill didn't allocate any funding. It would cost $3.75 billion to guarantee that money.
Critics have called the plan a bailout.
Detroit's automakers, however, and the United Auto Workers argue a $50 billion package may be necessary, which would cost $7.5 billion to guarantee.
The direct loans would give Detroit's automakers, who all have sub-investment grade credit ratings, the lowest available interest rates and save them more than $100 million per $1 billion borrowed. Detroit News 08/28/08 The future cost and availability of energy are too important to be left to market forces to control.
That's why we are about to witness the most demanding, meddlesome period of U.S. federal involvement in the affairs of Detroit's automotive industry in history.
That may sound scary, and some of it is. But it may provide the last best chance for the Detroit Three automakers to survive and thrive.
General Motors Corp., Ford Motor Co. and Chrysler LLC, reeling from volatile fuel prices and the collapse of SUV and pickup sales, are letting it be known that they may not all survive until 2010 unless Washington provides them access to as much as $50 billion in low-cost loans.
This being a presidential election year, with Sens. Barack Obama and John McCain each needing to win Michigan or Ohio or both, it's likely the Detroit Three will get help from a skeptical Congress.
Any help from Washington will come with strings attached.
Some will want to tell Detroit what to build. Obama is already promising to have 1 million plug-in hybrid cars getting 150 m.p.g. on the roads by 2015.
Some in Congress, with strong ties to organized labor, will want to tell Detroit where to build the cars and where to source the parts. Hint: not Mexico, not China.
Just as the next president may feel beholden to Michigan or Ohio voters -- and thus inclined to preserve jobs by aiding Detroit -- the automakers would be beholden to the politicians who toss them a lifeboat.
Although the terms may be onerous, the timing could be fortuitous.
There's a national consensus emerging that America must kick its reliance on foreign oil and fossil fuels. Wind and solar power, biofuels and electric cars are touted by both parties as solutions of the future. All were mentioned repeatedly in a town-hall chat Tuesday at the Democratic National Convention, led by Michigan Gov. Jennifer Granholm.
This could be good for Detroit.
GM, Ford and Chrysler have been hammered by foreign-owned rivals for decades in the game of selling old-fashioned gasoline-powered cars.
They're better positioned to compete, however, in some key sectors of the Green Economy.
Plug-in electrics? GM is making a huge bet on the Chevrolet Volt, due in 2010, which could do for GM's eco-image what the hybrid Prius has done for Toyota. More at Detroit Free Press