Detroit Has Plans for Loans to Retool. First It Must Survive.

Without help, GM says, it will be out of cash before the Volt is ready to sell.
Without help, GM says, it will be out of cash before the Volt is ready to sell. (By Bill Pugliano -- Getty Images)
By Steven Mufson
Washington Post Staff Writer
Sunday, November 16, 2008

DETROIT -- In Washington, President Bush and others see the $25 billion in loans Congress has already approved to retool the ailing automobile industry as a convenient pot of money to help automakers survive the economic tumult.

But here, automakers regard that money differently; it was part of a 2007 quid pro quo for helping them meet tough new fuel-efficiency standards. Without it, they'll need to revamp their fleets to meet that mandate without assistance, and that, they say, is no easy task.

Ron Gettelfinger, president of the United Auto Workers union, said yesterday in a conference call that "the intent on that was to build an industry of the future." The purpose of getting additional money now is different, he said. "The other thing is let's keep the industry alive so we can move into the future."

The General Motors battery laboratory at the company's sprawling tech center provides a glimpse of just how difficult moving into the future can be.

Here, GM technicians try to simulate 10 years' worth of driving wear and tear on batteries in just a few months as part of a frenzied effort to meet a timetable for getting an electric car on the road. Batteries hooked to measuring devices run 24 hours a day. A sealed vault subjects them to temperatures below 30 degrees, and plastic tubes pump coolant into packs that hold 288 lithium-ion batteries.

It's a race against time for cash-strapped GM, which has heavily promoted the vehicle to convince customers -- and Congress -- that it has a broader commitment to new technology and fuel efficiency.

That pressure has only gotten more intense as the need for a turnaround has grown more urgent and a chorus of skeptics has questioned whether taxpayer money should be used to bail out a fragile industry that historically has been slow to deal with changing consumer demands.

"Tension is my friend," said Robert A. Kruse, GM's executive director of global vehicle engineering for hybrids, electric vehicles and batteries, as he stood in the stuffy lab. "You never know what heat and pressure does. When applied to coal it can produce diamonds, but it can also make coal dust."

As fast as Kruse is moving, it isn't fast enough. He hopes to have the much-ballyhooed Volt in showrooms by the end of 2010. But GM says that without federal assistance it will run out of cash long before then, perhaps as early as February.

The tension in Washington is pitting the long-range policy goals Congress had in mind a year ago when it approved the loans against the immediate needs of the financial crisis. Under Energy Department rules, the original $25 billion would only be paid out after companies invest in new advanced technologies. Disbursements would be made over several years. An official at one major automaker said he expected that two-thirds of the money would end up going to suppliers of parts rather than to the Detroit threesome.

Democrats oppose the Bush administration's bid to dip into the package originally intended to help meet the corporate fuel economy standards known as CAFE.

"That robs the industry's future to pay for the present," said Jim Manley, a spokesman for Senate Majority Leader Harry M. Reid (D-Nev.). "The first $25 billion, that was part of the grand bargain for CAFE standards," said Michigan Gov. Jennifer Granholm (D). "That was to make sure that we in America produce the next engine, the next fuel-efficient engine that will wean us off foreign oil. The other part is a bridge loan to get us through this financial crisis."

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