Daily Auto News Auto Bailout Passes: Big Three to Get Big Check from Uncle Sam
Daily Auto News
Congress members working through the weekend provided $25 billion in aid to the struggling U.S. auto industry. The money will come in the form of loans and much be used to help U.S. manufacturers produce more fuel-efficient vehicles.
The Wall Street Journal reports, “The Senate voted 78 to 12 to pass a broad, must-pass spending bill that includes $7.5 billion to start the loan program. The House passed the bill earlier in the week, and President George W. Bush is expected to sign it.” The loans had already been approved as part of the 2007 energy bill, but not funded. Saturday’s vote approved the funds. The bill requires that automakers use the money “to retool aging auto plants to make hybrids and other fuel-efficient vehicles,” working toward an average fuel economy rating of 35 miles per gallon by 2020.
The loans aren’t strictly limited to American-owned automakers. AFP explains, “Under provisions of the new legislation, not only US carmakers are eligible for the guarantees but also suppliers and foreign automakers with plants in the United States that are more than 20 years old — Nissan and Honda’s US operations qualify.”
Other foreign automakers, however, are not pleased with Congress’s decision to help out the Big Three.
But don’t call it a bailout. ABC News reports, “‘Bailout’ isn’t the word automakers are using. A greener Big Three, the automakers argue, will reduce the country’s dependence on foreign oil. Chrysler Vice Chairman Jim Press told ABC, “It’s not a bailout. It’s a good investment between industry and government.” Critics of the plan disagree. Economics Professor Peter Morici of the University of Maryland said “Oh, I’d call it a bailout. They are having increasing difficulty borrowing money in the private credit markets because there’s a high risk of default. In that environment, giving them a government loan is a bailout.”
Bailout or not, the loans might be just the start of what Detroit needs. The Detroit-Free Press comments, “The loans are one of several government aids — from research funds to consumer tax credits — that automakers will increasingly rely on to build the technology they need to survive.” Michigan’s Congressional delegation has already “pledged to seek an additional $25 billion after the elections, citing the industry’s financial woes.”
Still, the loans may not come as quickly as the Big Three want. Detroit’s WWJ radio reports, “The Energy Department, which will parcel out the 25-year loans, says it will take at least six months and possibly up to 18 months to get the program running.” Congress members are already criticizing that aspect of the plan. Sen. Debbie Stabenow (D-Mich.) told reporters, “It’s absolutely unacceptable for them to take six months or longer to implement this program and make capital available.’”
If presidential politics are any indication, the domestic auto industry might be able to count on more federal help. At an appearance in Detroit on Sunday, the AP notes, Democratic nominee Barack Obama touted his support for the loans. In response, prominent John McCain supporter Sen. Joseph Lieberman (I-Conn.) replied, “that McCain not only supports the $25 billion loan package for automakers approved by Congress on Saturday, but also has proposed a $300 million prize for development of a battery powerful enough to run a car.”
They’re competing with one another over who wants to give Detroit more money. On that front, the Big Three couldn’t be happier.
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