Congress will approve $25b worth of federal low-cost loans under the 2007 Energy and Security Act. The funding will be included in a general bill that keeps the lights on down in DC. In other words, it’s a sure thing. And, let’s face it, a sweetheart deal. As The Detroit News reports, “The Big Three automakers, which have poor credit ratings [!!!], could save more than $100 million per $1 billion borrowed and will get as much as 25 years to repay the loans. They could also ask the Energy Department to defer repayment for up to five years.” And now, the bad news: the program won’t be expanded into a slush fush for the struggling Detroit automakers. The language continues to mandate that the money be used for retooling old factories to build fuel efficient vehicles. The good news: “…the U.S. Department of Energy will have broad latitude to determine how and which projects will qualify for loans under the program.” Let the lobbying begin! The bad news: “This is a $25 billion loan program (and) we’re going to carry out our due diligence in implementing a program this large,” Energy Department spokesman Healy Baumgardner promised. Translation: automakers aren’t likely to see any loans until spring of next year at the earliest. The consolation prize: the Volt will qualify for a $7500 federal tax credit. You know; after Uncle Sam gives GM billions to build it. Sweet!
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Cause Sam is not my uncle,it not my place to debate the pros and cons on this issue.
Its refreshing to see that the US government is going to attach some strings.The taxpayers of the United States for it or against it,will at least have some control.
Now here in my own country, we to have an election happening.I would be willing to bet within days we will hear some loan/handouts/bailouts for our segment of the US domestic car intustry.
Mikey,
Unfortunately, the DOE has a terrible track record of managing money and contracts. In fact I would not be at all surprised to find that a lot of DOE staff are showered with expensive “gifts” from Detroit lobbyists in the next 12 months.
Let the looting begin….
The funding will be included in a general bill that keeps the lights on down in DC.
Shouldn’t that be “keeps the lights on on Wall Street”? And everywhere banks, hedge funds, etc. reside.
Any plan that relies on effective government oversight is one that is doomed to fail.
The “strings” are just there to trick taxpayers into thinking the money isn’t just given away, as it is. It is inconceivable that the big 2.8 are not at this time converting plants that build gas guzzlers to plants that make small cars… The big 2.8 will be free to re-allocate the freed up money anywhere they want.
“Effective government oversight” is not needed therefore, the money will just be donated.
Hey, where’s MY bailout!?
I opened a lemonade stand on my front lawn this summer but lost money because it wasn’t as hot this year as it usually is (a fact I paradoxically blame on global warming!) and nobody bought my lemonade. I spent money on lemons, electricity to make ice, and sunscreen to sit outside – I figure I’m out at least 20 bucks.
Therefore, I demand that the government give me $5 billion so I can invent a device to control the weather…
RetardedSparks: http://www.buymyshitpile.com/
Any plan that relies on effective government oversight is one that is doomed to fail.
Ditto any one that requires industry self-regulation.
This week Congress may write a $700 billion dollar blank check so that the Treasury can overpay for the bad mortgage, auto, and credit card loans of foreign and domestic financial companies that took horribly stupid risks. Those risks initially made those companies a lot of money, but now that they are loosing money they want their losses socialized. If we are lucky the bailout will come with ownership stakes in the bailed out companies, congressional oversight of the bad loan purchase process and executive compensation caps for the bailed out companies.
The funding of a $25 billion dollar loan package that was approved by Congress and the President as part of an energy bill, and that will go to rebuilding factories in the US that are owned by US shareholders pales in comparison to that financial bailout.
This is not moral relativism but an example of how government should intervene (the funding of well debated legislation targeted at specific goals), and how government should not intervene (blank check legislation passed under the-sky-is-falling threats from Paulson that are similar to Bush’s Iraq war threats). Remember “you must act now” is what a used car salesman tells you before he screws you (paraphrasing a Republican Congressman).
If the auto industry of any other county faced what the big three face the government’s action would be much stronger.
The problem with the subsidized loans to rebuild factories is that they will not do anything to solve the real problems crushing US automakers – overreaching state dealer protection and employee legacy costs.
The best thing Congress could do for the US automakers is to re-write Chapter 11 (specifically for the automakers) so that the automakers can shed their dealer and employee issues (like they could under a current Ch. 11) while guaranteeing customers that their warranties will be honored and that parts and service will remain available.
This money-for-nothing only reinforces my promise to never buy anything from F, GM, or Cry-co