WASHINGTON, D. C. – President Bush signed a $634 billion spending bill Tuesday that includes funding for $25 billion in low-cost government loans for the auto industry.
The landmark loan program will allow automakers to borrow money to retool plants to build advanced technology vehicles that are at least 25% more fuel efficient than currently required.
The program gives preference to plants at least 20 years old and sets aside 10% of the funds for companies with 500 or fewer employees – such as startup electric carmakers and some suppliers.
"We commend the Congress and the President for their action at a critical time in the auto industry's transformation," GM spokesman Greg Martin said late Tuesday. "Now, we need the rulemaking process to keep pace with the urgency in which we're developing new technologies."
Bush signed the bill Tuesday evening and issued a written statement but did not specifically mention the auto loans, reflecting a split among his advisors on whether to back funding for the program. The White House ultimately refused to take a position.
Senate Energy Committee Chairman Jeff Bingaman, D-N.M., said late Tuesday he was pleased that Bush signed the bill.
Michigan lawmakers plan to return next year to seek another $25 billion in loans for 2009 and 2010, and more flexibility in how the funds can be used.
The low-cost loans will carry interest rates of about 5% and could save Detroit's Big Three more than $100 million per $1 billion borrowed. On the open market, the financially strapped companies would face interest rates of 15% or more.
Automakers would have up to 25 years to repay the money and could seek a five-year repayment deferment. Congress approved $7.5 billion to cover the costs of insuring the loans and deferment.
The loan program was created as part of the 2007 energy bill, which hiked fuel efficiency standards 40% by 2020, but was not funded by Congress. The United Auto Workers strongly backed the provision to make it more economical for automakers to keep production in the U.S.
The bill includes language requiring the Energy Department to draft final rules overseeing the loan program within 60 days of it becoming law. It also gives the department $10 million to hire outside consultants to help them write the rules. But Energy Secretary Samuel Bodman warned in a letter last week that it could take "six to 18 months or more" to approve and award funds.
Michigan members of Congress and others denounced that timeline as unacceptable.
Source: Detroit News