Auto Industry Bailout Rules Unveiled as Automakers Seek to Double the Funding
By John O'Dell November 6, 2008
Remember that $25 billion, low-interest loan program Congress recently approved funding for to help the ailing auto industry re-tool U.S. factories to build more fuel-efficient cars and trucks?
Not a penny of the auto industry bailout loans has been distributed - the Energy Department only published its rules for the program yesterday - but the domestic auto makers already are asking that the total be doubled, to $50 billion.
The chief executives of General Motors Corp., Ford Motor Co. and Chrysler, along with the president of the United Auto Workers Union, are in Washington today meeting with House Speaker Nancy Pelosi and the Michigan Democratic contingent, the subscription-only Greenwire news service reports.
Whether they get the extra funding or not, it will be a while before any of the companies actually gets any money - the loan applications have to pass several government review processes including one for environmental friendliness.
It is expected to be early next year before any funding is delivered - and that's if applications start rolling in now. It would take a presidential declaration of an emergency situation to speed things up.
Under the DOE's interim rule, preference will be given to automakers that have been operating in the U.S. for 20 years or more - a provision that favors the domestic companies. But any automaker with a U.S. factory - or plans to build one - can apply.
One big hurdle - the applicants have to show that they are financially viable and will likely be around to repay the loans - a provision that could hurt Chrysler and a few others.
Read Edmunds Auto Observer's take on the bailbout rules,
Record fuel prices this summer and a shortage of the small cars people suddenly were demanding, followed by the credit crunch and now the collapse of the auto market as the nation slumps into a recession have left all three domestic companies, and many import brands, strapped for cash.
The interim rule for the loan program says funds can be provided for any project that "re-equips, expands or establishes" an manufacturing plant that is in the U.S. and produces cars or auto parts that are 25 percent more fuel efficient than comparable present vehicles or components.
Loans will only cover projects started after a company files an application, and will be doled out in progress payments as recipients need the money for the approved projects.
"We are very pleased the Department of Energy is moving forward with a sense of urgency, and we look forward to applying for these funds and putting these loans to good use," Greg Martin, GM's director of policy, told Greenwire.
We, too, look forward to them being put to good use. It would be a refreshingly different approach to spending taxpayer dollars.
John O'Dell, Senior Editor
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