Auto-Maker Loans Advance

Congress appears set to pass a $25 billion loan package to help companies meet new federal fuel-efficiency standards, but Detroit’s Big Three auto makers will still face significant hurdles before they can put the funding to use.

On Wednesday, the House of Representatives voted 370 to 58 to approve a broad spending bill that includes $7.5 billion to start the loan program. The Senate is expected to pass the budget bill this week, and President Bush is expected to sign it.

Once the legislation passes, the Department of Energy would have two months to promulgate its own regulations, governing how and when auto makers and suppliers can apply for the loans and what criteria the government will use to approve those loans.

The basic rules as currently written, however, appear to restrict considerably the kinds of projects the auto makers could use the money for. The guidelines were set down in last year’s energy bill that authorized the $25 billion in loans, and that bill states the money can only be used to overhaul plants that are at least 20 years old and will be upgraded to make vehicles that offer about a 25% improvement in fuel economy over similar models in their class.

Auto makers want the rules loosened to allow more leeway on how they can use the money.

Auto-industry experts expect the money could be used for a broad array of efforts to build more-fuel-efficient vehicles — from smaller car designs from Europe to be built in the U.S. to the research and development for new hybrid-electric models.

David Cole, president of the Center of Automotive Research in Ann Arbor, Mich., said the legislation was designed to benefit U.S.-based auto makers over their rivals.

“At this point, anything the Detroit three can get in terms of loan guarantees is going to be a critical factor in what keeps them alive,” Mr. Cole said.

Source : online.wsj.com