GM says federal loan requirements too stringent
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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