September 12, 2008 / 12:10 AM / in 9 years

Wagoner tells Congress: "not seeking bailouts"

4 Min Read

<p>General Motors Corp. headquarters is seen in Detroit July 29, 2008.Rebecca Cook</p>

WASHINGTON (Reuters) - Detroit automakers are not seeking a government rescue, but need quick congressional action to free $25 billion in federally backed loans to help them retool plants and meet new fuel efficiency targets, the chief executive of General Motors Corp said on Friday.

"I'm not here today asking for any bailouts," Wagoner told a U.S. Senate energy summit. "We need to approve the ($3.8 billion) appropriation to authorize those loans and to very quickly draft regulation."

Wagoner said low interest credit would enable distressed automakers to "move more rapidly" in making necessary changes to their business to meet last year's federal mandate for 40 percent better fuel efficiency by 2020.

Congressional Democrats in both houses say they would like to appropriate the $3.8 billion needed to issue the loans to support investments in battery and other advanced technology before the end of the month, possibly in must-pass spending legislation.

The Bush administration has begun work on the regulation needed to administer the loans, which would also be available to foreign carmakers and industry suppliers.

Assistance was included in last year's energy law that established the first large increase in fuel economy targets since the standards were introduced more than 30 years ago.

Wagoner also said the government must loosen eligibility criteria, which limits loans to projects that improve fuel economy by 25 percent, to ensure flexibility for a range of key initiatives, including gasoline-electric hybrids.

Sen. Carl Levin, a Michigan Democrat and industry ally, said he wants to get the eligibility changes and the loan trigger completed quickly and at the same time.

Wagoner and his counterparts at Ford Motor Co and Chrysler LLC are turning to the government because their poor financial condition makes borrowing in commercial credit markets prohibitively expensive.

Industry has quietly dropped its request to add another $25 billion to the program over a longer term, sensing uneven support among lawmakers for such a package.

Sales and market share have declined sharply at Ford. GM and Chrysler, with an accelerated and steep decline in light truck sales.

JP Morgan said in a research note on Thursday that government-backed loans, if approved at $25 billion, could "notably reduce bankruptcy risk" at one or all of the Detroit companies.

Wagoner said GM would "do our best to manage through an unprecedentedly difficult situation in the capital markets" if the money does not come through.

Automakers are also seeking changes in the loan program to ensure that they can qualify for help. Currently, Detroit automakers would probably fall short on some projects, especially those dealing with certain gasoline-electric hybrids.

The White House has been skeptical of direct financial help for auto companies, saying on a number of occasions that it does not want the loan program to be used as a bailout.

"Obviously we want to be very, very careful about the government's role with private enterprise," White House spokesman Tony Fratto said.

Wagoner does not believe the industry will have to offer new inducements beyond a commitment to meet the mileage targets to win the support of critics and make the White House feel more comfortable.

Earlier on Friday, the top Republican on the Senate Banking Committee, Richard Shelby, said the industry should not receive the loans.

"I don't see this as a national problem," Shelby said in an interview on CNBC television. "I see this as their problem."

Ford shares rose nearly 5 percent on Friday to close at $4.91, while GM shares close 2 percent higher at $13.01.

Additional reporting by David Bailey in Detroit and Jeremy Pelofsky and Karey Wutkowski in Washington; Editing by Tim Dobbyn and Andre Grenon

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