Auto Loan Program Delayed
Saturday, February 7, 2009
A $25 billion federal loan program to modernize the auto industry isn't moving as fast as carmakers and some in Congress would like.
About a year ago, lawmakers created the loan program to help the automakers and their suppliers revamp old plants and boost production of advanced fuel-efficient vehicles. And as the industry's financial situation worsened, it emerged as an important lifeline.
Yet, despite being rushed through Congress, then expedited by the Energy Department, federal officials still have not set a timetable to evaluate the submissions and allocate the money. The delay highlights some of the difficulties in pushing money out the door as Congress debates the best way to stimulate the economy.
Despite being authorized by Congress in December 2007, money for the program was not appropriated until the fall and rules governing applications were not drafted until November.
As of Jan. 23, the department had received and reviewed 75 applications for the federal car loans. In that batch, 26 moved on to the next round, which assesses the technical eligibility of the project and financial viability of the company applying.
Those that were rejected were notified why they did not meet the criteria and may supplement their applications by March 31.
Ford, which is seeking $5 billion in direct loans by 2011, made it through the first review.
"So far we're doing well in that whole process, so we're hoping to make it through the next hurdle," said Susan M. Cischke, Ford's group vice president of sustainability, environment and safety engineering.
The next step could be trickier. The government must assess whether applicants will be able to pay back their loans, at a time when sales across the industry have fallen to their lowest levels in decades. The deliberations come as the government weighs whether to offer a different set of loans to General Motors and Chrysler, which are scrambling to meet a Feb. 17 deadline to prove they are worthy to receive more. Complicating matters is the fact that the Obama administration has yet to name a car czar, who presumably would take part in such a review.
The aid for developing more fuel-efficient cars is being taken up separately. Earlier this week, Sens. Dianne Feinstein (D-Calif.) and Olympia J. Snowe (R-Maine) sent a letter to Energy Secretary Steven Chu urging him to create a plan for distributing the money.
"Many of the applicants for the first tranche of loans plan to make significant capital investments that they would otherwise be unable to afford," they wrote. "Providing these firms with a precise timeline would allow them to plan their business operations during a time of extraordinary financial challenge."
Energy Department spokesman Dan Leistikow said in a statement that the secretary agrees that "the loans need to be issued as quickly as possible to help our automakers retool, create jobs, and produce the next generation of fuel-efficient vehicles."