U.S. approves loan rules, auto execs lobby for more
WASHINGTON (Reuters) - The Bush administration cleared the way for distressed automakers to access up to $25 billion in loans for making more fuel efficient cars, but red tape could still constrain the flow of money and industry is pressing for more aid now to survive.
The chief executives of General Motors Corp, Ford Motor Co and Chrysler LLC are scheduled to lobby House of Representatives Speaker Nancy Pelosi in person on Thursday on the need for new and immediate government intervention. United Auto Workers President Ron Gettlefinger is also expected to attend the meeting in Washington, industry sources said.
Automakers are "dialing up" the urgency for their second installment of congressional assistance this fall just days after manufacturing data showed U.S. auto sales dropping by a third in October and analysts warning that GM and Ford will on Friday again report dismal earnings.
GM has said it plans to announce more cost cuts as part of quarterly results.
Ford and GM welcomed Bush administration efforts on Wednesday to expedite regulations for administering the advanced technology loans. Industry believed two months ago the financing for more efficiency would be sufficient to help it fund crucial projects, like the electric Chevrolet Volt, and help it avoid further turmoil.
But this fall's Wall Street meltdown and the cascading global credit crisis sunk debt portfolios of the Detroit manufacturers and choked off consumer borrowing for auto purchases.
The industry's cash burn has accelerated and GM warned on Wednesday the industry's prospects are dwindling fast due to the "near collapse" in demand for cars.
"There's widespread recognition that the economic downturn and the credit crunch totally changed the situation and that industry is facing serious difficulties and there is a need for additional assistance," said Alan Reuther, legislative director for the UAW. "Things are different now than they were at the beginning of September."
Carmakers are ramping up their argument that their current need for aid is due to economic circumstances outside their control.
Pelosi called on Wednesday for a $61 billion stimulus plan to spur the U.S. economy, but said passage later this month in an abbreviated congressional session would depend on Senate Republicans and the mood of the White House.
Congressional lawmakers have said they would push for aid, possibly up to $25 billion in loans with no strings attached, to be included in any stimulus. The UAW has suggested using the money to cover retiree health care obligations, freeing up more industry resources for operational needs.
A senior congressional aide said there has been no consensus on what lawmakers might pursue for Detroit. Aides have previously said it is unlikely any assistance would be approved without some conditions.
The advanced technology loans approved in September, for instance, require companies be viable and meet other financial and environmental tests - which are reasons why it could still take several more months for money to start flowing.
Industry still hopes the Treasury Department will inject capital as part of its corporate rescue plan although the Bush administration rebuffed GM last week to help fund a possible merger with Chrysler.
Treasury and the Federal Reserve already have agreed to credit-based steps to stimulate borrowing in the auto sector.
President-elect Barack Obama courted U.S. automakers and pledged help, but the industry's health is deteriorating so rapidly it may not be able to wait for him to take office.
"He's not here until January (20th) and that's a long time in the life of these companies at the moment," John Engler, a former Michigan governor and president and chief executive of the National Association of Manufacturers, said.
Obama could still pressure the Bush administration and exert leverage on the Democratic-led Congress, if he believes action is needed to avert a broader economic crisis.
