WASHINGTON (Reuters) - Congressional Democratic leaders expressed the intent on Tuesday to make it possible for beleaguered U.S.-based auto companies to access at least $25 billion in low interest loans, a priority for industry facing tougher requirements for fuel efficient vehicles.
“It’s very important to our country,” House of Representatives Speaker Nancy Pelosi told reporters about credit assistance aimed mainly at helping General Motors Corp, Ford Motor Corp and Chrysler LLC retool factories and spark more investment in battery research.
Domestic manufacturers, whose core sport utility and truck business has collapsed amid record high fuel prices and a sluggish economy, lag behind Japanese and other overseas competitors in making gasoline/electric hybrids and other fuel efficient cars that consumers are now demanding.
Pelosi, a California Democrat, and her chief deputy, Majority Leader Steny Hoyer of Maryland, could not say whether funding legislation needed to trigger the loans could be approved before Congress is scheduled to leave town at the end of the month — possibly for the rest of the year.
Senate allies of automakers also said the matter was being discussed, but no decision has been made on how to get any measure through that chamber with time working against them.
“It will certainly be part of something that is moving. Given the three-week time frame its highly unlikely that it will be a separate piece of legislation,” said Sen. Debbie Stabenow, a Michigan Democrat.
Sen. George Voinovich, an Ohio Republican, said lawmakers are evaluating all aspects, but “it’s all brand new.”
The White House is watching the matter closely, but has said little publicly. It has previously urged the auto industry to shore up its own finances and has adamantly opposed any bailouts.
While up to $25 billion in government-supported loans for all automakers were included in the 2007 energy law signed by President George W. Bush, the White House has always been uncomfortable with any scenario that smacks of a bailout.
“Obviously when what is being proposed is taxpayer support for private companies, that’s not something that should be done without serious deliberation of the consequences,” a senior administration official said.
Auto chief executives vehemently deny the loan program is a bailout, instead characterizing it as a way for them to access the massive financing needed to overhaul their businesses to meet a government mandate for an overall 40 percent improvement in fuel efficiency by 2020.
“We are in very good shape as far as liquidity,” Ford chief executive Alan Mulally said on Monday.
Credit downgrades have pushed borrowing costs sharply higher for Ford, GM and Chrysler. Government-backed loans could make it much cheaper for carmakers to finance their rapidly changing businesses.
To access government-backed loans, Congress must approve money to cover debt risk. This is what auto industry supporters in Congress are focusing on now.
For the full $25 billion in credit assistance available under law today, the taxpayer hit would be roughly $3.8 billion. Automakers would like to double the amount of available credit to $50 billion, which would raise the congressional outlay to roughly $7 billion, Pelosi said.
However, gaining another $25 billion in help now would take separate legislation at a time when the congressional calendar is compressed and the agenda is heavy with other priorities.
Pelosi suggested the funding could be attached to pending energy legislation or a separate spending bill that must pass before the end of the fiscal year on September 30. Or, she said, loan funding could be placed in a second economic stimulus package, but that may not materialize until the next presidential administration in January.
Automakers prefer a quicker response
Additional reporting by Jeremy Pelofsky and Donna Smith; Editing by Andre Grenon