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Bush signs off on automaker loans

by Bill Cawthon on

President Bush signed a $630 billion government spending bill on the last day of September. Included in the legislation is the funding for the $25 billion in low-interest loans for the auto industry.

The loan program, to be administered by the Department of Energy, is intended to help car companies retool plants to produce a new generation of more efficient vehicles.

The industry did not get everything it wanted: U.S. automakers were hoping for a $50 billion loan package but had to settle for the amount Congress approved, but did not fund, in previous legislation. In addition, Chrysler, Ford and GM lobbied unsuccessfully for the removal of a loan provision requiring funds to be used for new vehicles achieving a minimum 25 percent improvement in fuel economy.

The loan program is not specifically aimed at U.S. automakers; foreign automakers and suppliers with plants more than 20 years old can apply for funds. Ten percent of the loans are reserved for small companies, defined as those with fewer than 500 employees.

Interest on the loans is about five percent, perhaps a third or less what the U.S. automakers would have had to pay on the open market, if they could get the financing at all. The loans are to be repaid within 25 years but manufacturers could apply for a five-year extension.

The measure requires the the DOE to draft final rules for the loan program within 60 days after the bill becomes law. However, Energy Secretary Samuel Bodman warned last week that required compliance with other federal laws means it could be as much as 18 months before the department could approve the first loans, a delay several members of Congress called unacceptable. Automakers are hopeful that the first loans could be authorized in early 2009.

Bill Cawthon grew up in the auto industry in the 1950s. His Dad worked for Chrysler and Bill spent a number of Saturdays down on the plant floor at Dodge Main in Hamtramck. Bill is also the U.S. market correspondent for just-auto.com, a British auto industry publication, and a member of the Texas Auto Writers Association, which has named the Jeep Grand Cherokee the “SUV of Texas” several times and named the Ram 1500 as the “Truck of Texas” two years running.

Bill has owned five Plymouths (including the only 1962 “Texan”), one Dodge and one Chrysler and is still trying to figure out how to justify a Wrangler. He also has owned at least one of every 1:87 scale model of a Chrysler product. You can reach him directly at (206) 888-7324 or by using the form.


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