The Wall Street Journal reports that Detroit's Big Three automakers may soon ask the federal government to help them ride out their worst sales year in decades. "Earlier this month, the Detroit Free Press reported that the top dogs at Ford, GM and Chrysler had a meeting of the minds and decided that the way out of their current losing streak would be to ask the feds for a lifeline," The Journal says. "Lobbyists for the car makers are taking their pitch for direct federal loans around Washington, with a goal of unveiling the plan after Labor Day -- conveniently in the frenzy of the fall election campaign." Their request, reportedly, is "for the government to lend some $25 billion to auto makers in the first year at an interest rate of 4.5%, or about one-third what they're currently paying to borrow. What's more, the government would have the option of deferring any payment at all for up to five years."
The Los Angeles Times adds, "The car companies would use such loans to pay for expensive retooling of factories as they move to smaller, more fuel-efficient cars in coming years, as well as to develop new technology." The loans would not be explicitly restricted to the Big Three, but "the direct loan program requires that the money be applied for use only in plants that are at least 20 years old." Nearly no foreign-owned auto plants meet that requirement.
How likely is such a plan to work?
The move is timed to allow the companies to benefit from the Presidential campaign. The loan plan could become an election issue, with neither party willing to oppose what could be seen as a boost to job prospects at auto plants -- many of which are located in industrial states seen as keys to the fall election.
The Detroit Free Press reports, "The move picked up the endorsement of a key player Friday -- Republican presidential hopeful John McCain." McCain said in a statement late last week "I believe we should fund" the proposal, "and take action that will assist Detroit and its suppliers in making it through this difficult time of transition." Democratic rival Barack Obama has already said he supports a similar plan, according to the Free Press. The Journal adds, that Obama has "signaled that he's open to federal money to help the auto makers invest in 'renewable' technology."
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