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Dingell presses for approval of auto industry loans
Dingell said he's trying to get the funding secured before Congress adjourns for the year. His push follows GM's Aug. 1 report of a $15.5 billion quarterly loss and Ford's $8.7 billion deficit from a week earlier.
GM, Ford and Chrysler are closing factories that produce pickups and sport-utility vehicles being shunned by U.S. consumers who are turning to more fuel-efficient vehicles. They also are speeding development of models such as gasoline-electric hybrids, fuel-cell vehicles and electric cars that use less or no fossil fuel.
'The Congress and candidates are asking how they can support an industry critical to the economy,' said Greg Martin, a spokesman for Detroit-based GM. 'We're pointing to an existing mechanism that can help,' he said, referring to the Energy Independence and Security Act of 2007. Ford spokesman Mark Truby and Chrysler spokeswoman Shawn Morgan declined to comment.
Dingell said that vehicle sales account for about 4 percent of U.S. gross domestic product.
The rules call for loans for as long as 25 years with an interest rate set at the cost of funds to the Department of Treasury for obligations of comparable maturity, according to the text of the legislation. The loans can cover as much as 30 percent of the cost for assembly plants, component production and some engineering.
GM unsecured debt due in 25 years yields 12.94 percentage points over comparable government debt. That's $129.4 million annually over the cost of government debt in additional interest for each $1 billion.
'It's another way to help them in an amazingly challenging period,' said Pete Hastings, a fixed-income analyst at Morgan Keegan & Co. in Memphis, Tenn. 'Lenders are pulling back in general, and what they can borrow for is going to be expensive.'
The government funding is for projects and spending completed by Dec. 30, 2020.
Presumptive Democratic presidential nominee Barack Obama said Monday the government should support efforts to put at least 1 million so-called plug-in hybrid vehicles on the road by 2015. They would travel as far as 150 miles per gallon of gasoline.
GM, Ford and Chrysler are closing factories that produce pickups and sport-utility vehicles being shunned by U.S. consumers who are turning to more fuel-efficient vehicles. They also are speeding development of models such as gasoline-electric hybrids, fuel-cell vehicles and electric cars that use less or no fossil fuel.
'The Congress and candidates are asking how they can support an industry critical to the economy,' said Greg Martin, a spokesman for Detroit-based GM. 'We're pointing to an existing mechanism that can help,' he said, referring to the Energy Independence and Security Act of 2007. Ford spokesman Mark Truby and Chrysler spokeswoman Shawn Morgan declined to comment.
Dingell said that vehicle sales account for about 4 percent of U.S. gross domestic product.
The rules call for loans for as long as 25 years with an interest rate set at the cost of funds to the Department of Treasury for obligations of comparable maturity, according to the text of the legislation. The loans can cover as much as 30 percent of the cost for assembly plants, component production and some engineering.
GM unsecured debt due in 25 years yields 12.94 percentage points over comparable government debt. That's $129.4 million annually over the cost of government debt in additional interest for each $1 billion.
'It's another way to help them in an amazingly challenging period,' said Pete Hastings, a fixed-income analyst at Morgan Keegan & Co. in Memphis, Tenn. 'Lenders are pulling back in general, and what they can borrow for is going to be expensive.'
The government funding is for projects and spending completed by Dec. 30, 2020.
Presumptive Democratic presidential nominee Barack Obama said Monday the government should support efforts to put at least 1 million so-called plug-in hybrid vehicles on the road by 2015. They would travel as far as 150 miles per gallon of gasoline.
