Want the $25 Billion? Here Are the Hoops To Jump Through
November 07, 2008
By Bill Visnic
The U.S. Department of Energy Thursday issued the draft rules for automakers seeking the long-ballyhooed $25 billion in loans Congress recently approved for automakers (and suppliers) to retool factories to produce a new generation of more fuel-efficient vehicles.
Sure, strings had to be attached, or the automakers would burn through the dough like sailors on shore leave. But saying there are hoops to be jumped through in this "interim final rule" is an understatement.
The official name of the sometimes controversial bailout is the Advanced Technology Vehicles Manufacturing Incentive Program. The program says automakers and suppliers must put any loaned monies toward making light-duty vehicles or components that "provide meaningful improvements in fuel-economy performance beyond certain specified levels." The broad guidance: 25 percent better fuel economy.
Our environmentally astute colleagues over at Edmunds.com's Green Car Advisor already have sorted through the 67-page interim rule (which means it's not set in stone; DOE is accepting comment on this business), and their analysis is a great exec summary: You'll also find a handy link to the actual document if your weekend isn't action-packed enough.
Meanwhile, the stipulation that automakers and suppliers have to prove they are "financially viable" in order to demonstrate the ability to pay back the loan raises intriguing new angles, particularly for privately held Chrysler LLC, owned by notoriously close-mouthed hedge fund Cerberus Capital Management LLC. With Chrysler sales cratering and the company wobbling toward insolvency, will Cerberus open up the books to the government -- even if it's all presumably confidential?
And might the "financially viable" stipulation (there's a lot of talk about EBITDA, debt-to-equity ratios and all sorts of stuff Wall Street barons used to deem important) or other details in the legislation make it difficult -- or corporately uncomfortable -- to qualify for the cash, including the kind of fuel-economy engineering goals that Detroit has in the past claimed to be challenging, or even impossible, to meet?
Over the years, Detroit and the Feds have not been the best of friends. Now, the scorched-earth economy has made them uneasy partners -- with one holding the all-important purse strings. If the DOE's engineering demands, in particular, truly are the stuff of impossible dreams, automakers had better hope their lobbyists and other go-betweens can make their points in the likely brief "comment" period that allows dissenting opinion.
Posted by Michelle Krebs at 4:07 AM under Chrysler , Companies , Ford , GM , Technology | Comments (0) | digg this | Seed Newsvine
Leave a comment