Detroit News - Bill Calls for Loan Guarantee for Big 3

Bill calls for loan guarantee for Big 3

$20B in federally backed funds would help automakers develop fuel-efficient technologies.

David Shepardson / Detroit News Washington Bureau

The Big Three automakers could get up to $20 billion in federally backed loan guarantees to speed the development of "green technologies," including hybrid electric engines, flexible fuels and clean diesel under a bill to be introduced this week in Congress.

U.S. Rep. Mike Rogers, R-Brighton, said the bill would give domestic automakers cheaper access to capital and spur faster development of technologies to reduce dependence on foreign oil.

"This isn't the dreaded bailout word. This isn't a free pass for them to avoid painful decisions or restructuring," Rogers said Tuesday. "This is a chance for the automakers to compete on a fair playing field with access to the credit markets. This is about supporting real jobs for real Americans through innovation."

General Motors Corp., Ford Motor Co. and DaimerChrysler's Chrysler Group have all seen their credit ratings sharply reduced; GM and Ford are rated as speculative or junk status.

On Tuesday, Ford and Ford Credit's ratings was reduced again by both Moody's Investors Service and Standard & Poor's rating services.

If adopted, the bill could dramatically reduce borrowing costs for the Big Three, potentially saving them hundreds of millions of dollars.

Automakers were receptive to the congressman's proposal, welcoming the financial support for technological research.

"We find it encouraging that there is support from Congress to accelerate green technology," said Mike Moran, a Ford spokesman.

Rogers said the bill would speed up research and increase "the commercialization of American-made hybrid electric, clean diesel and flexible fuel vehicles." It would also allow an automaker to retool a plant to take advantage of new technologies.

The bill would create a "$20 billion green technology incentive program" that would grant the U.S. Energy Department the authority to approve loan guarantees to automakers for specific projects such as hydrogen research or E85, an alternative fuel made of 85 percent ethanol. The provision would mean the U.S. Treasury must repay the loan if an automaker defaults.

"This bill is fiscally responsible because it requires the loans be paid back," Rogers said. "I don't think this bill will cost taxpayers one cent."

Rogers said the bill would also "level the cost of investment capital in the United States between domestic and Japanese auto manufacturers." Ford said it supported the measure and disclosed it has expressed interest in a new, smaller federal loan-guarantee program.

On Aug. 7, the Energy Department unveiled guidelines for a $2 billion loan guarantee program to "help spur investment in projects that employ new energy technologies," stemming from a provision in the 2005 Energy Bill; applications are due Nov. 6.

Ford spokesman Moran said the automaker had been in "pre-application discussions with the Energy Department to see if there is a fit with what we are doing."

Rogers said hundreds of thousands of American jobs are directly or indirectly supported by Ford, not to mention retirees who live on Ford pensions. "Ford's survival is in America's interest," he said.

GM spokesman Greg Martin said the automaker wasn't seeking loan guarantees.

"It's an intriguing idea that merits consideration, but right now our turnaround and our success rests on the advanced technology that we are putting in our cars and trucks today," he said.

The proposal is modeled after an $18 billion loan-guarantee program Congress passed in October 2004 to build a 3,500-mile natural gas pipeline in Alaska.

While the draft bill is meant to help the Big Three automakers, it doesn't exclude any automaker. Rogers said foreign-based automakers would be eligible to apply.

Jo Cooper, Toyota's vice president for government affairs, applauded the effort, as long as it remains fair. "We really want our competitors to be strong and competitive in the marketplace," he said. "If it was offered broadly to companies in the industry and wouldn't advantage some companies over others, it may be very attractive."

Rogers has been sounding out members privately about the bill in recent weeks and has garnered a lot of support -- even from a member of the House Republican leadership.

Rogers said he hopes the bill can be approved by the end of the year.

"Anybody with an auto plant in their district, anybody will an understanding of the auto industry, will support this bill," Rogers said. "No one in America wants to see Ford's turnaround plan fail."

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