Congress to Consider Auto Loans in Spending Bill
A proposal to fund $25 billion in low interest loans to the auto industry was included on Monday in draft legislation that could be considered by the U.S. Congress later this week.
The must-pass spending measure would set aside $7.5 billion in taxpayer funds to cover default risk and issue the government-backed credit.
President George W. Bush is expected to sign the spending bill that would keep the government funded.
The loan program is mainly aimed at helping struggling U.S. manufacturers General Motors , Ford Motor , and Chrysler, which is controlled by private equity firm Cerberus Capital Management.
A congressional aide said the draft language would be included in the final bill, a victory for automakers and their allies in Congress who have pushed hard in recent weeks for lawmakers to act swiftly.
Lawmakers had planned to leave town at the end of this week, but a sweeping proposal by the Bush administration over the weekend for a government bailout to address the crisis on Wall Street has muddled the congressional calendar.
The draft bill also includes $10 million for the Energy Department to administer the loans.
However, there was no language in the legislation to address an auto industry request for Congress to ease the rules under which they might qualify for help.
Energy Department officials are drafting regulations for the loan program.
The auto industry hopes to access money sometime in 2009.
The unfunded loan package was included in last year's energy law to help auto manufacturers and their suppliers meet demands for making more fuel efficient cars.
The law requires that new vehicles on U.S. roads get 40 percent better fuel efficiency by 2020.
Loan proceeds could, for example, be spent on retooling plants from production of gas guzzling sport utilities and pickups to smaller cars powered by advanced technology engines.
These could include alternative fuels or gasoline-electric hybrids or all-electric vehicles.
The U.S. badly trails Japanese rivals in cars that rely heavily on advanced batteries.
GM, Ford and Chrysler executives mounted a lobbying blitz in recent weeks meant to convey urgency and to assure lawmakers that the loans would be repaid, and that it was not a bailout.
Due to their poor finances and uncertain outlook, GM, Ford and Chrysler face worsening credit prospects.
They complained to lawmakers that borrowing costs for making the necessary changes in their business were prohibitively expensive.
GM on Friday announced it would draw down the remaining $3.9 billion of its secured credit line to maintain its financial flexibility as it restructures.
Fitch Ratings cut GM's rating further into junk territory, citing concerns about liquidity.
Standard & Poor's Ratings Service said the move did not immediately affect GM's ratings.
Turnaround specialist Wilbur Ross championed auto industry loans at the Reuters Restructuring Summit, saying help for automakers would help the kinds of consumers that Congress has said it wants to target with any bailout of the financial services sector.