GM, Chrysler Miss Benchmark for $25 Billion Loan Program
Wednesday, April 8, 2009
Next month, $25 billion in loans aimed at producing more fuel-efficient cars will start flowing to suppliers and automakers -- just not to the two companies most in need of funding, General Motors and Chrysler.
The Energy Department program dictates that companies must be "financially viable" to receive the loans. And last week, the Obama administration ruled that, at least for now, both GM and Chrysler cannot meet that benchmark.
The president gave GM 60 days to rework its restructuring plan by negotiating concessions from the United Auto Workers union and its bondholders. In 30 days, Chrysler must do the same, plus complete its proposed alliance with Fiat.
"We don't see this as a denial of our application," GM spokesman Kerry Christopher said. "Until the determination that we're a viable company can be made, we're not going to be given the loans."
Energy spokeswoman Stephanie Mueller said the department could not comment on individual applications.
GM has applied for $10.3 billion to fund projects such as the Chevrolet Volt, its plug-in electric car. Chrysler is seeking about $8 billion to build hybrids and other battery-powered vehicles.
Ford, which may be the only domestic automaker that qualifies, applied for $5 billion in direct loans by 2011.
After lawmakers protested that these critical loans weren't moving fast enough to help the struggling auto industry, Energy Secretary Steven Chu said the first round of loans would be granted in May.
"We're still on track to meet the secretary's time line of offering loans within the next few weeks," Mueller said.
Of the 75 applications submitted this winter, 26 moved on to the next round, which assesses the technical eligibility of the project and financial viability of the company applying.
And companies continue to line up for funding. By March 31, the second deadline for applications, the Energy Department received 21 additional applications totaling $6.6 billion in requested funding, Mueller said.
Meanwhile, domestic automakers continue to work on putting the next generation of vehicles on the road.
Yesterday, GM and Segway, maker of a motorized upright scooter, demonstrated a new two-wheeled vehicle that they aim to develop by 2012. Designed to provide urban commuters low-cost transportation, the pod-shaped, battery-powered vehicle is supposed to travel 35 miles on a single charge, with a top speed of 35 miles per hour. GM called the prototype the PUMA, for Personal Urban Mobility and Accessibility, and said it should cost a fraction of what a regular car would cost.
"Imagine small, nimble electric vehicles that know where other moving objects are and avoid running into them," said Larry Burns, GM vice president of research and development and strategic planning, in a statement. "Now, connect those vehicles in an Internet-like web and you can greatly enhance the ability of people to move through cities, find places to park and connect to their social and business networks."
Preparing to put electric cars on the road next year, Chrysler announced Monday that Massachusetts-based A123 Systems would be its lithium-ion battery supplier.
And small California start-ups Tesla Motors and Aptera Motors are set to compete for the X Prize, a privately funded $10 million contest to build a car that can achieve the equivalent of 100 miles per gallon.