WASHINGTON (Reuters) - President George W. Bush on Tuesday signed into law a mammoth spending bill to keep the government running until early March 2009 that includes a $25 billion loan package for troubled automakers.
The action came after the Senate over the weekend gave final congressional approval to the more than $630 billion spending bill that was needed to finance defense, education, farm, health, foreign aid and other government programs after the current fiscal year expired on September 30.
The spending legislation allows a ban on offshore drilling to expire on September 30. Democrats had hoped to extend the ban, but did not have the votes to overcome strong opposition from Republicans.
Bush, in a statement announcing that he had signed the legislation, said the measures to lift the ban on offshore drilling “will allow us to reduce our dependence on foreign oil.”
The bill sets aside $7.5 billion in taxpayer funds needed to guarantee $25 billion in low-interest loans to help General Motors Corp, Ford Motor Co and Chrysler LLC produce more fuel-efficient cars and trucks.
U.S. automakers have said the taxpayer-backed loan package
would give them access to capital at a time when credit markets are shut and they are being driven to invest in new technologies to meet tough new federal fuel economy standards.
The $25 billion loan package, the biggest federal subsidy for the auto industry since the 1980 bailout of Chrysler, cleared Congress last weekend when the focus was on the debate over the $700 billion financial rescue package.
GM, Ford and Chrylser had said they could manage without the federal loans but also suggested that without the federal subsidy thousands more industry jobs could be at risk.
Both presidential candidates, Democrat Barack Obama and Republican John McCain, backed the auto loan package, which had strong support in battleground election states like Michigan and Ohio.
U.S. auto sales have been slumping for three consecutive years, forcing Detroit automakers to slash jobs and cap new investment. Through August, U.S. sales were down 11 percent and on track to hit the lowest level in 15 years.
The loan package was authorized — but not funded — in a 2007 energy law that requires automakers to improve the fuel efficiency of their vehicles by 40 percent by 2020.
Major automakers have said that will require up to $100 billion in combined new investment to retool factories and invest in new technology, including next-generation battery-packs for electric vehicles.
Industry executives, including GM Chief Executive Rick Wagoner and Chrysler Chief Executive Bob Nardelli, said they would press for liberal federal guidelines once the law was sent to regulators in order to use the funds to offset the cost of a wide range of investment.
Japanese automakers Toyota Motor Corp and Honda Motor Co could be eligible for the low-cost federal funding but have said they have no intention of applying for the loans.
Congress passed the massive spending bill before the new fiscal year began October 1 because lawmakers failed to approve any of the 12 spending bills needed every year to fund government operations.
Reporting by Tabassum Zakaria and Kevin Krolicki; editing by Carol Bishopric