GM says federal loan requirements too stringent

First Fannie and Freddie, now the Big Three?

In the past week, the question of $25 billion worth of federal loan guarantees for automakers has gone quickly from policy-wonk material to full-fledged national debate. Carmakers are not sitting by quietly.

General Motors Corp. Chairman and Chief Executive Rick Wagoner addressed a Senate committee today, arguing that such loans were vital for the industry. But he said a requirement that the money be used to improve fuel efficiency of vehicles by at least 25% was too stringent.

Instead, he told the Energy and Natural Resources Committee, the loans should be applicable to projects that increase fuel efficiency by as little as 10%. That translates, on a vehicle like the Chevy Silverado, to less than a 2 mpg improvement. And for the entire GM lineup, which in 2007 had an average fuel economy of 25.16 mpg, fewer than 3 mpgs.

Considering that the law creating the loan guarantees also called for an increase in industrywide corporate average fuel economy to 35 mpg by 2020, Wagoner's proposed 10% bar seems awfully low. Besides, it's not like GM doesn't know how to build fuel-efficient cars: In 1994 it had at least three models that got over 35 mpg, but GM's most efficient car in 2008 gets 29 mpg.

The loan guarantees were approved in last year's energy bill but have not been appropriated by Congress. If fully funded, the guarantees could cost the government an estimated $3.75 billion. In the past two months, American automakers have been increasing pressure to fund the loans. This week, the push has moved to Defcon 4, and the Big Three are suggesting that $50 billion, rather than $25 billion, might be more appropriate.

Among those chiming in this week:

• House Speaker Nancy Pelosi (D-Calif.) said she hopes to include a funding provision in so-called must-sign legislation, such as a spending bill. Senate Majority Leader Harry Reid (D-Nev.) was similarly enthusiastic .
• Sen. Richard Shelby (R-Ala.) opposed the loans, saying on CNBC that he doesn't "see this as a national problem. I see this as their problem." Shelby represents a state that has Mercedes-Benz, Hyundai and Honda plants, but no GM, Ford or Chrysler plants. Under the language in the energy bill, it's nearly impossible for foreign manufacturers to qualify for the loans.
• The National Assn. of Manufacturers came out in favor of the loans this week. It is headed by John Engler, the former governor of Michigan. Also speaking up for the loans was the United Auto Workers union.
• Ford Chief Executive Alan Mulally went on television today to stump for the loans, estimating that the industry's costs to comply with the new fuel economy standards would ultimately reach $110 billion.
• Presidential candidate Barack Obama has come out enthusiastically in favor of the loans, going so far as to say he'd support $50 billion in guarantees, while rival John McCain, once an opponent of such federal help, has said he supports the $25 billion number.

Meanwhile, a few institutions have made news by their silence on the issue, among them the National Automobile Dealers Assn., which said it is remaining neutral on the loans (although many dealers are supporting it individually). Also surprisingly quiet: the White House. President Bush has made no public comment on the matter, and spokesmen have been guarded as well. 

Today, Wagoner got the last word in:

“I’m not here today, and I don’t know that my colleagues from other companies are either, asking for bailouts,” Wagoner said. “The industry conditions, the general credit conditions, have gotten so difficult that it would be helpful if that money got approved.”

--Ken Bensinger

Photo: GM Chairman Rick Wagoner addresses a Senate hearing. Credit: Brendan Smialowski/Getty Images

Comments

[Deena Larsen]

But we have to make cars more efficient as we compete globally. Obama has the vision to make this happen and to ensure that we gain jobs--he can reach his goal of 5 million green jobs.

[Steven Wilson]

If these idiots aren't going to make the cars fuel efficient....then let their companies go under.

I'm tired of paying terrorists billions of dollars in fuel costs to support their indescent regimes.

Who wants a car with crappy fuel mileage. Wake up for once in your lives.

[Steven Wilson]

Obama was taliking about guys pushing lawn mowers. That's his idea about green.

Other than that....he has no ideas. He definitely isn't going to drill for more oil in the United States.

He is in bed with the environmental lobby. They have no ideas......and are all about stopping any development of American Oil in the United States.

[Camila Altschul]

Obama supports the loans, he doesn't support the loans...why can't he take a stance on anything other than taking away our guns and raising our taxes? That's not leadership. If you want true leadership, look to Detroit, where these guys pulled the wool over the eyes of Congress and the American people to get those money. That's real leadership!

You're right, Steve Wilson. No ideas.

[RadioCeleb99]

The political plan from day one was to get the bill passed and then after it was passed change the requirements. The public backlash resulting from these sleight of hand backroom politics is growing at an unprecedented pace. I predict that some very influential politicians who are lining up to support relaxing the standards will discover it to be an overwhelming liability when they face the scrutiny of reelection

[Tom Wilkinson at GM]

Two thoughts:

Getting to a 35 mpg fleet average will take many steps, some large like the Volt, some small smaller, like the rollout of more efficient gas engines. So it is well within the spirit of the law to ask that the loans be available for those smaller steps as well.

Also, before you opine about relative fuel economy, please visit the EPA site. As we have noted, segment by segment, GM vehicles stack up very well to the competition. Those are hard facts, not PR spin.

You will also discover that you can't compare modern vehicles to the fuel economy leaders of the past, such as the Geo Metro. Modern vehicles have more structure and more safety features, and those add weight.

[Leland Baldwin]

congress question to Auto CEO's.
Did any one of you fly here commercially, Raise hand.
Let the record state none flew commercially.

Auto CEO's not supporting the airlines.
Auto CEO's Seem to think they have a right to the life style of the God's

They make more than the President of the United States. How can they have a harder job than the President of the United States.

Please don't support the Auto Makers. This industry needs to wake up and realize the country does not owe them a living.

Please Vote against the Auto Bail Out.

Respectively
Leland Baldwin

[chris call]

where is it going to stop.we didn't bailout other companys folding.why are the american people bailing out private companys ? is this a capitalist country or socialist? people don't want the government involved in their business,but here are 3 major companys with their hands out wanting a bailout for piss poor managing.also how many have been taking out bonuses from these piss poor manage companys the last few years.if this is america ,then companys come and companys go.let the american process happen.my tax dollars are suppose to go to health care ,social security,helping the people of this country not the banking system which is a private company also car companys if we all run our households like these companys we all will need bailouts.i have no 401k now, pensions are in jeop over a bunch of greedy companys who did not take care of business