In the past week, the government has offered bailouts to struggling financial firms and insurers, and some in Congress have begun to debate a second economic stimulus plan, but America's automotive industry is still struggling without government help. Lobbyists from America's largest automakers have descended on Washington to plead their case.
The AP reports, "Among the few bills likely to actually become law before Congress closes shop for the elections is a plan to give struggling U.S. automakers $25 billion in federal loans. Opponents criticize it as a taxpayer-funded industry bailout, but the legislation is steaming ahead anyway, buoyed by the support of both John McCain and Barack Obama." The plan would require automakers to use the money "to produce cleaner, more fuel-efficient vehicles," but following the demands of the market, that's something all are already trying to do.
The program has already been approved, but not funded. "Funding is needed before any loans can be made. The money would subsidize the loans, provide a cushion for possible defaults and absorb the cost of permitting automakers to defer loan payments for up to five years. The Congressional Budget Office says the $25 billion in loans would cost the government $7.5 billion."
In an analysis, Reuters says the industry has "a dire need for taxpayer-backed loans because the deepening credit crisis has shut the cash-starved industry out of the capital markets."
So will it pass?
Representative Candice Miller (R-Mich.) told CNN Money that the loans are getting "a lot of pushback on [capitol] hill," with opponents saying "now here's the domestic auto industry...just driving up to the bailout window."
But the AP reports, "So far, no organized opposition to the loans has emerged on Capitol Hill." Few lawmakers are willing to publicly oppose the loan plan during an election year when auto industry jobs are key to the economic health of several political swing states.
The move has the support of governors in many states that depend on auto industry jobs. The Detroit Free Press notes that "the governors of Michigan, Illinois, New Jersey, Tennessee, Ohio, Wisconsin, South Dakota, Delaware, Kansas and North Carolina" have all written to ask Congress to approve the funding.
The head of the United Auto Workers union has endorsed the plan, and even suggested a larger loan package. UAW President Ron Gettelfinger told Reuters "The U.S. auto industry needs $50 billion in low-interest, government-guaranteed loans and could return to the U.S. Congress for a second round of $25 billion after approval of the first $25 billion."
It also has the backing of both major-party Presidential candidates. The Chicago Tribune reports that Republican candidate John McCain plans to use the issue in advertisements in the Midwest next week. A new McCain ad boasts that McCain plans "Loans to upgrade assembly lines, tax credits to boost sales of clean vehicles, and offshore drilling to reduce the cost of gas and spur truck sales." But the Tribune notes that that ad "makes McCain's record toward the auto industry sound more favorable than it really is. McCain has recently decided to support $25 billion in loan guarantees for the domestic automakers, but he was not on board with the idea as soon as Democratic rival Barack Obama, who has said he would support as much as $50 billion in loan guarantees to help the automakers retool to make more fuel-efficient and alternative energy vehicles."
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