Auto Companies Lobby on Bailout

Posted September 12, 2008 at 6:12pm

U.S. automakers are lobbying Congress to weaken mileage requirements for new plant upgrades tied to a $25 billion low- interest loan package.

The low-interest loans are being pushed on a bipartisan basis by Michigan’s delegation, both parties’ presidential candidates and Democratic leaders. They were authorized but not funded last year when Congress passed a 40 percent increase in fuel efficiency requirements.

Under that law, the loans can be used for upgrading plants to produce vehicles at least 25 percent more fuel efficient than other cars or trucks of the same type and were aimed at spurring the adoption of new fuel-saving technologies and designs.

But with automakers facing a sudden shift in demand to cars from trucks as gas prices soared this year, they announced plans to convert some truck plants to car production. The credit-crunched companies want Congress to let them qualify for the loans even if the cars produced aren’t much more fuel efficient than existing car models, an automaker lobbyist told Roll Call.

The companies argue that shifting plants from trucks to cars will produce a mileage gain larger than 25 percent so they should get credit.

“We’re going from big vehicles to small vehicles,” the lobbyist said, which could “double mileage” in some cases. The long-term requirement for a 35-miles-per-gallon fleet average would not change.

The domestic auto industry’s massive losses this year have caused these companies’ borrowing costs to skyrocket, making the low-interest loan package all the more urgent.

Politically, they also want to strike while the focus on auto-producing states such as Michigan is at a high, given the closeness of the presidential contest.

“The Speaker said it the other day, it’s about jobs, jobs, jobs, jobs,” the lobbyist said. “It helps that the road to the White House goes through auto states. … This is a real moment when frankly a lot of things have aligned.”

The auto companies have given up on earlier efforts to double the package to $50 billion and are focused on the $25 billion figure, which will require $3.75 billion in funding to offset the risk of a default.

Supporters would like to see that funding declared emergency spending so that it does not require painful offsets under pay-as-you-go budget rules.

“We want to be careful not to gore somebody else’s ox,” the lobbyist said. “The last thing we need is enemies.”

Although the auto company loan package has strong bipartisan support and backing from the business community and unions, it does not yet have the support of House Minority Leader John Boehner (R-Ohio), who said Friday that it seemed like a “bailout” to him but withheld judgment until he saw a full proposal.

The Bush administration also hasn’t fully weighed in, but a veto would seem extremely remote given that the president signed the bill authorizing the loans into law last year and a veto would put him at odds with Republican presidential nominee Sen. John McCain (Ariz.).

Speaker Nancy Pelosi (D-Calif.) said the package would likely end up as part of her stimulus bill or on the stopgap continuing resolution keeping the government running past Sept. 30.

Senate Majority Leader Harry Reid (D-Nev.) said the money could also be attached to a bipartisan energy package.

“My personal feeling is it’s really important to see if we can do something to jump-start what’s going on in Detroit, or I should say, what’s not going on in Detroit,” Reid said.

Emily Pierce contributed to this report.