Congress approves $25 billion loan to auto industry
Among all the news of the erstwhile $700 billion bailout for Wall Street, the approved $25 billion bailout for Detroit may have slipped past your radar. Chrysler, Ford, and General Motors have been asking Congress for money to help them get their factories up to green-speed. They’ve argued that in order to make vehicles that meet new fuel-efficiency standards of at least 35 miles per gallon by 2020, they need serious infusions of cash.
The $25 billion in loans from the Department of Energy to the auto manufacturers were actually authorized by Congress early this year but not funded. That changed last Saturday when Congress approved the line of credit. According to the Congressional Budget Office, automakers could use these loans to "equip or establish facilities to produce ‘advanced technology vehicles’ that would meet certain emissions and fuel economy standards; component suppliers could borrow funds to retool or build facilities to produce parts for such vehicles."
The auto manufacturers are getting a very good interest rate on their loans, according to the Associated Press, at about 5 percent. With their poor bond ratings, these automakers never qualify for such a sweet rate without government intervention. Conversely, auto buyers are having a harder time getting a car loan unless their credit records are spotless.
Many buyers are eager for clean, fuel-efficient vehicles, as interest in big SUVs and trucks wanes thanks to the cost of gas, the credit crunch, and growing environmental awareness. Plus, green-collar jobs would be most welcome in this sagging economy. We can only hope all this money adds up to something good.
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