By week's end Congress expected to OK low-cost loans for struggling domestic industry, officials say.
David Shepardson / Detroit News Washington Bureau
WASHINGTON -- Congress is likely to approve by the end of the week funding for $25 billion in low-cost government loans to aid the struggling domestic auto industry after more than a year of debate, congressional and auto officials said Monday.
The money is included in a House bill drafted by Democrats to fund the ongoing operation of the federal government; a copy of the draft bill was obtained by The Detroit News on Monday. The bill could be introduced in the House as early as today and voted on by Wednesday. The Senate is expected to vote by Friday.
The 30-page draft bill would be used to fund the federal government, perhaps until March, because Congress and the White House haven't agreed on a fiscal 2009 budget. It must be approved or the government would be forced to shut down. Congressional aides said Monday they thought the auto industry loans would most likely be attached to that bill.
The Congressional Budget Office said last week that Congress had to set aside $7.5 billion to cover the risk of automakers defaulting on their obligations. The draft measure allocates the full amount plus $10 million to the U.S. Energy Department to administer the loans for the Advanced Technology Vehicles Manufacturing Program. Detroit's Big Three CEOs held meetings last week with House Speaker Nancy Pelosi and other key members of both parties. Pelosi and both presidential candidates Barack Obama and John McCain have endorsed funding the loans. They each held a one-on-one meetings with Rep. Dave Camp, R-Midland, who has been making the case for the automakers with the White House. The White House's call for a $700 billion bailout for Wall Street boosted Detroit's Big Three automakers prospects for winning funding, in part because their loan request is a much smaller figure, and White House officials aren't looking to pick fights with Democrats, who need to pass the Wall Street bailout, aides said.
Automakers would save at least $100 million in borrowing costs per $1 billion borrowed, but it isn't clear how much they would receive. They could get as much as a 25-year-repayment period and the government could defer any repayment for up to five years.
Other aides said the funding bill could get rolled into the Wall Street bailout bill and no final decisions had been made.
Gimme Credit auto analyst Shelly Lombard said "the market expects lawmakers to provide at least $25 billion in loans to the industry before they leave for a recess."
"Blue collar workers are more sympathetic victims than 'rich' investment bankers. So it's easier to defend loans designed to save close to 100,000 jobs in the shrinking U.S. manufacturing industry," Lombard wrote.
Rep. Tim Walberg, R-Tipton, who generally aligns himself with conservative House Republicans, called the reaction to the plan among conservatives "mixed."
"If you've got auto plants in your state, you're going to support it," Walberg said Sunday at a fundraising barbecue for the Jackson County GOP. In conversations with Republicans reluctant to embrace the plan, Walberg said, he emphasizes that the need for the loans stems from government-imposed fuel economy standards.
"I think we really do have an obligation," he said.
All three Detroit automakers are burning through cash amid the worst auto market since the early 1990s.
Fitch Ratings on Monday said it was dropping General Motors Corp.'s credit rating deeper into sub-investment grade status -- in part because of a lack of access to capital.
GM chairman and CEO Rick Wagoner said previously that the automaker wasn't counting on money from the loans to be part of its liquidity plan, and it could be well into 2009 before automakers saw any money. The Energy Department must write regulations for the program and certify that automakers are "financially viable without the receipt of additional federal funding associated with the proposed project." The law also sets aside 10 percent of the money for small automakers and suppliers with 500 or fewer employees. GM and Ford Motor Co. lost a combined $24 billion in the second quarter of the year and third quarter earnings are due shortly before the election.