Funding Approved For Historic Industry Loans
WASHINGTON, DC., September 27, 2008 - According to Harry Stoffer, writing for Automotive News, Congress gave final approval to funding that will launch a $25 billion low-interest loan program for automakers and suppliers.
The program, designed to help companies retool for more fuel-efficient vehicles, also is expected to provide a financial lifeline to struggling companies, particularly the Detroit 3.
The funding that is needed to begin the program, about $7.5 billion, was attached to a wide-ranging spending bill that will keep the federal government running in the new fiscal year that begins Wednesday.
The Senate vote Saturday was 78-12 in favor. The House approved the bill last Wednesday. President Bush is expected to sign it.
The loan program, representing unprecedented government involvement in industry operations, was approved with little public debate.
Some Republican senators complained Saturday that they were faced with a huge take-it-or-leave-it bill that included add-on provisions that might not have passed on their own.
Sen. Jeff Sessions, R-Ala., warned that loans to the industry could violate international trade agreements that restrict government subsidies for private businesses.
Sen. Jon Kyl of Arizona, the Republican whip, said that features of the loan program are "eerily familiar" to easy-credit practices among home lenders that led to the nation's current financial crisis.
Indeed, most attention at the Capitol this weekend was focused on continuing efforts to negotiate a separate $700 billion government rescue of the nation's financial system.
The auto industry loan program, by contrast, was almost non-controversial.
After President Bush signs the bill, the Department of Energy will write rules to manage the loan program. Then companies need to apply. Loan-interest loans could be available by mid-2009 even though some administration officials have said legal and administrative procedures could delay them until 2010.
General Motors spokesman Greg Martin, in a prepared statement, said, "Congress clearly recognizes the need to move forward at this critical time to make available this source of capital for automakers and suppliers. Authorized nearly a year ago, these direct, federal loans will support advanced technology development and implementation and will help speed the transition to cleaner, more fuel-efficient vehicles."
The loan program was authorized – but not funded – by an energy law enacted last December. The same law requires sharply higher fuel economy standards in the 2011-2020 model years -- standards that will force automakers and suppliers to make tens of billions of dollars in new investments in plants and equipment.
This year falling new vehicle sales and dramatically higher borrowing costs compelled industry leaders, particularly from the Detroit 3, make funding of the program a top priority.
The effort included Capitol Hill visits this month by the Detroit 3 CEOs and Ford Motor Co. Chairman Bill Ford.
Industry lobbyists succeeded in getting the funding attached to a bill that Congress had to consider before going home for November elections.
Nevertheless, the $25 billion program represents unprecedented government intervention in the industry – far exceeding 1979 loan guarantees for Chrysler Corp. and long-running federal support for vehicle technology research.