Automaker loans not a bailout, GM's Wagoner tells Senate

Sep 12, 2008 (Detroit Free Press - McClatchy-Tribune News Service via COMTEX) -- GM | Quote | Chart | News | PowerRating -- Federal loans of $25 billion for the U.S. auto industry would be a "tremendous help," but would not equal a bailout of Detroit's struggling automakers, General Motors Corp. Chairman Rick Wagoner told Congress on Friday.

The pitch from Wagoner came as the U.S. Senate prepares what appear to be the first votes on the industry's loan hunt early next week, as part of several energy bills. While Michigan Sen. Carl Levin said support seems to be building on Capitol Hill, the Bush administration signaled Friday it was still undecided about the industry's bid.

"Obviously, we want to be very, very careful about the government's role with private enterprise out there," White House spokesman Tony Fratto told reporters. "There are lots of industries that are dealing with challenging economic conditions, and it's always important to be very cautious about the federal government's role."

Michigan's Republican lawmakers have also been lobbying colleagues and the Bush administration to back the loans.

"If Congress could move rapidly to enable the loans that were approved to be funded and dispersed ... that would be a tremendous help," Wagoner told a Senate hearing on energy policy.

Wagoner's remarks were the most public attempt so far from Detroit's automakers to get the loans, which were approved but not paid for in last year's energy bill. Automakers have seized on the program as their best hope for relief from a cash crunch that's expected to last through 2010, although for now they have dropped a bid for $50 billion in aid.

Wagoner said since the $25 billion loan program was passed last December, the U.S. economy and shaky capital markets had severely hurt the industry's ability to pay for new technology out of its regular cash flow.

One hurdle for the auto industry grew higher Friday, as the Congressional Budget Office raised its estimate for the cost of the $25 billion loan program at $7.5 billion, double the previous price tag. The director of the CBO said on his Web site that worsening credit markets had made the government's costs far higher under budget rules.

"The ramifications have been huge," he said.

Sen. Bill Nelson, D-Fla., said while he supported the loans, he didn't think they would be enough to save Detroit automakers from financial trouble, which would spur them to come back to Washington with a rescue plan.

"It is hard for me to do that when each year in the Senate, you all, collectively Detroit, have opposed us and beat us every year when we have tried to increase miles per gallon standards," Nelson said. "Why should we now come to the financial rescue?"

Wagoner said the industry was just seeking what was agreed to as part of last year's energy bill raising fuel economy standards to 35 mpg by 2020.

"I'm not here today, and I don't know that my colleagues from other companies are either, asking for bailouts," Wagoner said. "The industry conditions, the general credit conditions, have gotten so difficult that it would be helpful if that money got approved."

Wagoner also said GM, Ford and Chrysler would like to see the rules covering the loans expanded so that the money could pay for a wider range of more efficient vehicles.

Under that bill, the loans could only be used to retool for vehicles that top their direct competitors' fuel economy by at least 25 percent. Wagoner said few improvements, including GM's two-mode hybrid system, would meet such a target.

"Dramatically expanding this kind of hybrid system would not be eligible for funding under the rule," Wagoner said. "I understand from our competitors many of the projects they would undertake which would enact significant improvements in fuel economy _ 10, 15 or 20 percent _ would not be eligible for their funding support as well."

The prospect of the loans has boosted the shares of GM and Ford over the past two days. But Wagoner said GM was not counting on the loans to replace any of the cash it plans to raise over the next couple of years.

If the loans "don't come through, we're going to do our best to meet the challenges," Wagoner said.

He added that the industry did not need to make other concessions for the loans, and rejected criticism that GM had caused its problems by concentrating on pickups and SUVs instead of cars.

"It's silly to say we should be punished for doing the best trucks," Wagoner said. "All manufacturers have been hurt by this market shift."

Automakers and their allies have been lobbying heavily for the loans over the past three weeks, with House Speaker Nancy Pelosi saying she's committed to seeing the legislation pass the House.

Ford Motor Co. CEO Alan Mulally told CNBC on Friday that he was "very encouraged" about the loans getting approved.

Levin said the loans and the changes would likely appear in energy bills that the Senate plans to debate next week, adding he was hopeful the loans would pass before Congress adjourns.

The plan could also be added to Democratic economic-stimulus bills, which are likely to clear the House, but face high hurdles in the Senate.

"We're trying to get some momentum for it, and get it everywhere we can," Levin said.

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