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By Ian Swanson and Jared Allen
The Big Three’s chief executive officers held a rare Capitol Hill meeting Wednesday with House Speaker Nancy Pelosi (D-Calif.) and other Democratic leaders to ask for $25 billion in government loans for the auto industry.
Detroit wants the loans, authorized by Congress in last year’s energy bill but not yet appropriated, to revamp plants in Michigan and other states so that they can produce more hybrid cars and other fuel-efficient vehicles.
“Clear from your mind any notion of a bailout,” Pelosi told reporters after the meeting. “This is about innovation.”
The Big Three need to start selling more hybrids, not only to compete with foreign competitors, but to meet tougher fuel-efficiency standards included in the 2007 energy bill. In a letter to Pelosi, the three CEOs said the cost of complying with the new standards would be more than $100 billion over the next decade.
The letter also said high gas prices, the housing crisis and other economic ills had cut into Detroit’s sales, leading to the worst economy for struggling automakers in decades.
“These factors have severely impacted our financial situation and have led to the most difficult business environment for our domestic auto industry in over 30 years,” said the letter, signed by Ford CEO Alan Mulally, General Motors (GM) CEO Richard Wagoner and Chrysler CEO Robert Nardelli.
After the meeting, Mulally said it had been a great day at the Capitol. “We’re very pleased with the bipartisan support we’ve received,” he said.
Nardelli said sessions on the Hill “went extremely well,” adding that “time is critically important.”
Momentum for the automakers appears to be growing.
House Republican Whip Roy Blunt (Mo.) and Conference Chairman Adam Putnam (Fla.) both struck positive notes on the loans on Wednesday, and both presidential candidates have offered support. The White House, however, has been noncommittal.
The Big Three cannot secure the loans without an appropriation from Congress to cover the risk of the companies defaulting on the loans. That will cost $7.5 billion, as the Congressional Budget Office has scored the program using an estimated 30 percent default rate.
The lobbying push by automakers comes amid a tumultuous week on Wall Street in which the government effectively nationalized one of the nation’s largest insurers, the American International Group (AIG), while allowing investment bank Lehman Brothers to go into bankruptcy.
Ford, GM and Chrysler, as a result, are fighting the perception that they are asking for a bailout. They argue Congress already authorized the loans in last year’s energy bill, and that providing the funding is in America’s national interest since it would help wean the U.S. off foreign sources of oil, since less foreign oil would be needed if more Americans could drive more fuel-efficient vehicles.
Asked about Detroit’s request, Mulally said, “I would characterize it as an enabler.”
“Our request of Congress is different than what it is being compared to by some observers,” said Bruce Andrews, a lobbyist for Ford, who noted the loans would be repaid with interest, and are not cash grants.
“Plus, these loans are part of legislation, passed by Congress and signed by the president, to help us transform to more fuel-efficient vehicles more quickly.”
Greg Martin, a spokesman in Washington for GM, said helping U.S. automakers compete with Asian manufacturers that are producing hybrids is in the national interest, and when it is explained in that way support is widespread and bipartisan for the loan programs.
“That’s the difference between us and the recent events,” he said.
The Big Three are getting backing from both presidential candidates, including Sen. John McCain (R-Ariz.), who in the past has been criticized for saying that some jobs lost to foreign producers will not return to the United States.
On Wednesday, McCain offered rousing support for the Big Three in a speech at a GM plant in Grand Rapids, Mich. He said Wall Street firms were receiving taxpayer support, and that the auto industry and autoworkers were also deserving of help.
“I’m here to send a message to Washington and Wall Street: We are not going to leave the workers here in Michigan hung out to dry while we give billions in taxpayer dollars to Wall Street,” McCain said, according to a transcript e-mailed to reporters by his campaign.
“It is time to get our auto industry back on its feet. It’s time for a new generation of cars and for loans to build the facilities that will make them.”
In January, McCain came under criticism during Michigan’s GOP primary for stating that some of the jobs that had left the state were not coming back. He later lost Michigan’s primary to former Massachusetts Gov. Mitt Romney, whose father was once governor of Michigan.
The White House has offered caution on the loan program, but it could be difficult for President Bush to vocally oppose it given McCain’s support. In addition, Michigan is a swing state that both McCain and Democratic presidential candidate Sen. Barack Obama (Ill.) hope to win.
“Obviously, we want to be very, very careful about the government’s role with private enterprise out there,” White House spokesman Tony Fratto said Friday. “There are lots of industries that are dealing with challenging economic conditions, and it’s always important to be very cautious about the federal government’s role.”
It may also be difficult for GOP leaders in the Senate and House to offer any criticism of the funding, since the loans would go into improvements in plants across the country, some of which are in swing districts. Ford plants in Ohio, Kentucky, Minnesota, Illinois, Missouri and Michigan could benefit, while GM plants in Kansas, Michigan and Ohio could get a boost.
Putnam on Wednesday said his colleagues had told him automakers were making a “persuasive” case that the loans were a wise use of taxpayer dollars.
It’s unclear what measure the loans could be attached to, although many think the continuing resolution that would allow the government to keep operating is the most likely.
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