Lost somewhat in the attention paid to the financial services industry's $700 billion bailout was congressional
approval of a $25 billion loan package geared toward U.S. automakers to assist them in building more fuel-efficient vehicles.
The Senate on Saturday voted 78-12 in favor of a larger spending package that included the loans, following in the footsteps of a House vote last week. The bill is expected to be signed by George W. Bush before the government's current budget expires on Tuesday.
The automaker portion provides capital for $25 billion in government-backed loans authorized in December 2007 as part of an energy bill but never funded. Exact terms and rules still have to be decided, but the loans are expected to be limited to funding research into more fuel-efficient vehicles and technologies.
The money comes as Detroit's Big Three are struggling to weather a slowdown in auto sales and revamp their production lines and designs around smaller, more fuel-efficient vehicles. All the companies are bleeding cash while that transition takes place. Ford earlier this year abandoned its initial goal of being profitable in 2009, while General Motors is in the process of raising $15 billion through asset sales, cuts and new borrowings to give it the cash cushion it needs.
While some criticized the government intervention, the automakers argue the loans are needed to fund continued R&D necessary to meet stricter fuel economy standards mandated starting in 2011. The Detroit News cites National Highway Traffic Safety Administration estimates that it will cost automakers nearly $50 billion to meet the new standards.
Opponents of the bailout might have lost the battle, but the fight will apparently go on. According to the Detroit News reports, Michigan Sen. Carl Levin plans to seek an additional $25 billion in loans in 2009 and 2010, with other spending including a possible $7,500 tax credit for hybrid vehicles also possible. - Lou Whiteman
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