Detroit pushes for a $50-billion bailout
Would John McCain or Barack Obama bail out General Motors Corp. or Ford Motor Co. should the shadow of bankruptcy fall upon them?
Detroit isn’t waiting for November to find out. In recent months, the auto industry has been lobbying Congress to back $25 billion in low-interest loans for automakers and suppliers. Now, along with the United Auto Workers union, it’s asking for $25 billion more.
The original $25-billion loan package, which would cost the government about $3.75 billion to guarantee, was written into the 2007 energy bill; it aims to help offset the estimated $100-billion cost of improving fuel efficiency in cars to 35 miles per gallon by 2020. But Congress has yet to appropriate the money, and the Energy Department has yet to write final rules on the loan program.
Senate Democrats last month proposed spending $900 million to back $6 billion of the loans. That proposal is set for a vote next month. But the new plan being pushed by the industry would fund the approved loan guarantees -- and provide $25 billion more.
Early details suggest the plan would be a juicy deal: Interest rates would be about 4.5%, less than a third what the carmakers can expect on the open market. And Congress could defer all payments for as long as five years.
The loan program requires that the money be used only in plants at least 20 years old, a Ford spokesman said. Thus, most recipients would probably be American carmakers. That’s prompted criticism that the plan is a bailout aimed at only three companies, including Chrysler.
Obama’s campaign said Friday that he would support the $50-billion loan program.
In a June visit to a GM plant in Ohio, McCain said: “Frankly, I just don’t see a scenario where the federal government would come in and bail out any industry in America today.”
But he appears to be coming around, issuing a statement Friday saying, “We should fund [the original loan program] and take action that will assist Detroit and its suppliers in making it through this difficult time of transition.”
Apparently, it’s unanimous. Nobody wants to preside over a death rattle from Detroit.