Tuesday, July 29, 2008 Fed aid for Big 3 pushed
Michigan delegation makes nonpartisan effort for billions in tax credits, subsidies, loans. David Shepardson / Detroit News Washington Bureau WASHINGTON -- Michigan's congressional delegation is mounting a major push to help Detroit's Big Three automakers get about $27 billion in federal aid over the next five years. The behind-the-scenes efforts come amid growing concerns about the fate of the struggling domestic automakers. General Motors Corp., Ford Motor Co. and Chrysler LLC are paring back salaried staff, closing plants and dramatically cutting expenses at a time when the economy is in turmoil and auto sales could hit their lowest level in 17 years. Many Michigan congressional members think that if they don't start a concerted effort now to win significant financial support for automakers, it will be harder to do so later. Some of the proposals under consideration are the most generous considered since the 1979 Chrysler bailout, though they face long odds from a largely skeptical Congress. The chiefs of staff and top auto policy aides to most of Michigan's 17-member congressional delegation met privately Friday to discuss a broad set of policies to help the industry. The meeting was organized by the office of Rep. John Dingell, D-Dearborn, chairman of the House Energy and Commerce committee, which has jurisdiction over many auto issues. Topics included subsidies to cover one-third of automakers' losses, government-issued loans, loan guarantees and bigger tax credits for the industry and consumers. The Detroit News obtained a one-page summary of the proposal discussed at the meeting that calls for $5 billion in direct loans over five years; $3 billion a year for five years to help speed the retirement of 1.5 million older, less efficient vehicles; and $2 billion over five years in tax breaks for advanced vehicles. The group also called for $800 million over three years to develop an "advanced battery trust fund" to help build three domestic battery manufacturing facilities and for working in 2009 to block California from being able to impose its own emissions standards. There are signs that Congress may be more agreeable to offering automakers some assistance. More than 70 members signed a letter released Monday urging Congress to include funding for $25 billion in loan guarantees for automakers over five years in a second stimulus package that may be considered in September. The guarantees would cost the Treasury $3.75 billion. Congress approved the program in December when it ordered automakers to increase fuel efficiency standards 40 percent by 2020, but it didn't allocate any money to fund it. Through the 2015 model year, automakers will have to spend $47 billion to comply with the higher requirements. The loan guarantees are important because Detroit's automakers have sub-investment grade credit ratings, which make it difficult and more expensive to borrow money. The guarantees would let them borrow up to 30 percent of the cost of retooling plants. Ford announced last week it plans to convert two U.S. truck plants to building smaller more efficient vehicles. "It's important that we help the industry retool to create American jobs," said Sen. Debbie Stabenow, D-Lansing. "I don't want automakers to decide it would be less expensive to build a plant in China." Michigan members are planning to send a letter to congressional leadership urging action on some of the items and to again extend unemployment benefits in states like Michigan with high jobless rates. Michigan legislators also note that automakers face a potentially rocky road when the next president takes office. Both candidates Barack Obama and John McCain have endorsed giving California and other states the right to impose tailpipe emissions limits, while Obama also wants to increase a fuel economy mandate to a fleet-wide average of 50 mpg by 2026. "The federal government must be an active partner in the effort to create these jobs and technologies here in the United States," said Rep. Sander Levin, D-Royal Oak. For more than two years, proposals to help automakers have gone largely nowhere though a housing bill President Bush is to sign later this week will give each of the companies about $30 million in tax rebates. In April, Rep. Joe Knollenberg, R-Bloomfield Township, proposed $1.2 billion in aid to domestic automakers and rewriting the tax code to save automakers another $3.5 billion. David Cole, chairman of the Center for Automotive Research, said anything Congress could do "to help the domestics with their cash position would be very helpful." But he conceded it is "unlikely." "Congress doesn't often respond strategically," he said. "In a crisis they opt for short-term measures." Bush is opposed to an automaker bailout, while Obama hasn't directly addressed the issue. McCain told Dow Jones earlier "he would consider all options" if GM neared collapse. GM Chairman and CEO Rick Wagoner spoke with Senate Majority Leader Harry Reid, D-Nev., and House Republican Leader John Boehner of Ohio, after the automaker announced its plan to boost liquidity by cutting expenses by $10 billion by 2009 and raising another $5 billion through asset sales and borrowing. They discussed the loan guarantees among other issues, said Greg Martin, a GM spokesman. Some auto officials think they should try to get a broader package of support, because Congress may not be inclined to grant them a second round of help. John Diamond, an economist in tax policy at Rice University, said Congress has been under pressure to bail out many sectors, noting it is on the hook for as much as $25 billion from the Fannie Mae and Freddie Mac bailouts. "The case for an auto bailout may have gotten weaker in the last 30 years," he said, noting Congress "may be a little hesitant" to take on more. You can reach David Shepardson at (202) 662-8735 or [EMAIL PROTECTED] This message has been scanned for malware by SurfControl plc. www.surfcontrol.com _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
