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House approves $25B with Senate expected to act today; Energy Dept. ready to write rules.
Automakers could get billions as soon as early next year to retool factories to build more fuel-efficient vehicles after the U.S. House passed a bill Wednesday that included a low-cost federal loan program and congressional leaders took steps to fast-track the money.
The U.S. House approved the $25 billion loan program by a 370-58 vote as part of a stopgap spending bill to keep the government running through March 6. The Senate is expected to pass the bill today and President Bush is expected to sign it.
The final rules for the loan program must be written by the Energy Department and the added provision requires the agency to issue those rules within 60 days of the bill becoming law. It also gives the Energy Department $10 million to administer the program, including hiring outside consultants to help meet the deadline. That could help automakers to get funding in early 2009.
Without the provision, Sen. Debbie Stabenow, D-Lansing, said the Energy Department warned it would take up to a year to finalize the rules.
Energy Department spokeswoman Healy Baumgardner said, "As with any deadline, we will do our best to meet it."
The legislation culminates a more than two-year effort to help cash-strapped automakers and parts suppliers gain access to credit, and gives a big boost to automakers, which need billions of dollars to develop fuel-efficient vehicles and modernize the factories that will build them.
The $25 billion loan program was authorized in an energy bill approved in December that also hiked fuel efficiency standards by 40 percent and was intended to help automakers meet the new mandates, but Congress never funded it. Without the low-interest loans, Detroit's Big Three face double-digit interest rates to borrow money conventionally. The program will offer rates between 4 percent and 5 percent, saving automakers more than $100 million per $1 billion borrowed.
Sen. Claire McCaskill, D-Missouri, said a key turning point in convincing some holdouts came on Saturday when the Bush administration asked Congress to approve a massive bailout of the banking industry.
"Ironically, I think the sell got a lot easier when President Bush sent over a couple guys to say give me $700 billion," McCaskill said "All of a sudden, it seemed pretty darn reasonable."
Perhaps the biggest boost was that Michigan remains a very competitive state in the presidential election and both Sen. Barack Obama, the Democratic candidate, and his Republican rival, John McCain, have endorsed the $25 billion program.
Automakers were emboldened by the state's importance and quietly sought $50 billion, but were advised by Michigan members of Congress that they were unlikely to get it.
Michigan lawmakers were not successful, however, in convincing their colleagues to rewrite the program so the money could pay for actions beyond retooling plants. Automakers must plan to build vehicles that are at least 25 percent more efficient than required by federal rules to qualify for retooling money.
"We've got the best deal for the industry that we can," said U.S. Rep. John Dingell, D-Dearborn, chairman of the House Energy and Commerce Committee.
But several Michigan legislators said they would seek approval of another $25 billion in loans next year. "We will be starting on the second $25 billion, which we're going to have to get because the costs to the industry are going to be larger," Dingell said.
Congress approved $7.5 billion to cover the risk of a default on the loans over the concerns of many critics, including House Appropriations Committee Chairman David Obey, D-Wis. -- who said he's "not a fan of the American auto industry" -- and some in the White House who opposed it. The price for the program doubled this month when the Congressional Budget Office revised its estimate.
Automakers can repay loans over as much as 25 years and the Energy Department can defer repayment for up to five years.
Half of the cost to the government is that it assumes the auto companies won't begin repaying the loans for five years, said Peter Orszag, director of the Congressional Budget Office. Rep. Joe Knollenberg, R-Bloomfield Township, said the White House agreed to go along "even though they weren't entirely sold on it."
Automakers were also boosted by the Michigan congressional delegation -- which was unanimously behind the program -- and the fact that there was no organized opposition. The chief executives of the Big Three automakers, especially General Motors Corp. CEO Rick Wagoner, also aggressively lobbied members of Congress to win support.
Chrysler LLC's vice president for external affairs John Bozzella praised the passage, calling it "a very strong bipartisan effort that will drive advanced technologies."
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