The U.S. House of Representatives passed a bill this afternoon approving a $25 billion low-interest loan for domestic automakers. The bill passed with an overwhelming majority – 370 to 58 – and is on its way to the Senate for a vote on Friday before the White House gets the opportunity to lay pen to paper on March 6, 2009. The rates and rules of the loan are required to be spelled-out by the U.S. Department of Energy within 60 days of the bill becoming law, but automakers could be allowed to repay the loans over as long as 25 years, along with the Energy Department deferring payment for up to five years.Detroit's Big Three (or 2.8, or whatever) are counting on the loans to retool factories for more fuel-efficient vehicles, protect jobs and help fund the escalated development costs of fuel-efficient drivetrains. Having seen more government bail-outs than we'd like to over the past couple weeks, we're not ready to call this one a full-blown bail-out like those given to Fanny Mae/Freddie Mac, and AIG. These are low-interest loans that will likely come with specific stipulations on how the money can be spent. It's up to General Motors, FoMoCo and Chrysler LLC to spend them wisely.
[Source: Automotive News - Sub. Req.]
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Reader Comments (Page 1 of 5)
Michael @ Sep 24th 2008 5:48PM
This will be a fun entry!
John @ Sep 24th 2008 5:51PM
Well what a slap in the face to Honda for investing in cars and fuel efficient vehicles all their life.
Mark @ Sep 25th 2008 12:37PM
not their country of origin, they don't matter in this post.
GDUB @ Sep 24th 2008 5:56PM
Yay!!!!! The Free Market strikes again.
"Wait what? loans to retool factories for more fuel-efficient vehicles, protect jobs and help fund the escalated development costs of fuel-efficient drivetrains".
Thats so cool don't plan for the changing future just get low interest loans from unkle sam when u realize that the game has changed and u are not ready to play.
Free market my ass.
Stratojet @ Sep 24th 2008 9:13PM
This is easy to say when you are not in the auto industry.
Same has been said about Freddie Mac, Fannie mae, AIG and on and on...
Conclusion: your so-called free market does not exist, never existed. Japan , Korea, Germany, all support their auto industry in a way : health care, Hybrid technology development and so on.
These countries never gave any union the monopoly of the labor contracts as Frank Murphy, Michigan's governor did in 1937.
The UAW gained an extraordinary power after this and obtained advantages absolutly out of proportion with the rest of the other industries.
On the same note, the US Governement never did anything to stop frivolous lawsuits against the big 3. To this day , they still have to pay enomous amount of money for asbestos lawsuits for ex. Only Bush decided to have a look at this.
It is easy to say that the US government has nothing to do with the private industries. This is a very passé neo-liberalist philosophy that exist only at Harvard University.
The same institution which produced the many MBA'S who worked for the now defunct Lehman brother.
Give me abreak.
elprogramer @ Sep 24th 2008 9:22PM
Nothing says "Free Market" like CAFE and the EPA!
GDUB @ Sep 24th 2008 10:30PM
This is easy to say when you are not in the auto industry.
GDUB
Auto Industry:My father works for peterbilt as a engineer 30yrs and they routinly turn a profit. Do u want to know why because they innovate their product exe: long haul hybrid trucks.
Same has been said about Freddie Mac, Fannie mae, AIG and on and on...
Conclusion: your so-called free market does not exist, never existed. Japan , Korea, Germany, all support their auto industry in a way : health care, Hybrid technology development and so on.
GDUB
Duhhhhh it was a sarcastic Joke: Health care is broken and its bad for everyone who runs a major corporation or a small business let alone the private citizen. We pay enuff taxes to cover healthcare if the healthcare infrastructure was restructured.
Why would our government put a genuine push behind Hybrid technology development when u know their main intrest is keeping status quo that means making sure we have oil for our cars. oil oil oil thats the plan. In the past 20 years, automakers and government agencies have invested billions of research dollars into improving automobile fuel efficiency. Yet, vehicle fuel economy is stagnant. history shows the futility of research pursued in isolation from a complete strategy that includes policies for cutting fuel use by using technologies already on the shelf. remember money wont change peoples minds gubment mantra and policies can.
These countries never gave any union the monopoly of the labor contracts as Frank Murphy, Michigan's governor did in 1937.
GDUB
Unions: Look i am for workers benifits and reasonable wage and work conditions but in this world economy there is no way the auto makers in the midwest are going to be able to turn a profit when competing companies setting up no union shops. I personally think the day of the union is done but at some point fair and eqeul treatment of workers will have to be addressed some how.
The UAW gained an extraordinary power after this and obtained advantages absolutly out of proportion with the rest of the other industries.
GDUB
UAW:Look u expect me to cry because one set of loobyest does a better job of getting what they want. If they really wanted to get something done they should have done like the big energy companies and meet with old Cheney and made some favorable deals for them selves. I am guessing they didn't
On the same note, the US Governement never did anything to stop frivolous lawsuits against the big 3. To this day , they still have to pay enomous amount of money for asbestos lawsuits for ex. Only Bush decided to have a look at this.
GDUB
Frivolous lawsuits:Look at some point the consumer should have rights related to the safety of the product they purchaced. If said product is faulty then u should be able to sue. How else would u force someone to change a design or manafacturing process.
Bush: has been openly critical of Detroit's automakers. Two years ago, he pooh-poohed federal assistance for the Detroit Three, saying they needed to make "a product that's relevant." ok so he gave em 25 billion but he has not been a big friend of the big three.
It is easy to say that the US government has nothing to do with the private industries. This is a very passé neo-liberalist philosophy that exist only at Harvard University.
The same institution which produced the many MBA'S who worked for the now defunct Lehman brother.
Give me abreak.
Break: Sorry all out of TWIX I never said that US government has nothing to do with the private industries but bailing out huge corporations and turning around and telling a citizen down on their luck to pull your self up by your bootstraps and get a job seems mighty silly.
I am all for helping if everyone who is a american gets help in their time of need not just people who have access to power.
Stratojet @ Sep 24th 2008 10:59PM
Thanks for answering my comments. We do not see eye to eye, it seems , but we have to realize that what is going on in USA is the result of the "Laissez-Faire" policies of many past administrations. It just does not make sense to loose:
-Steel
-Textiles
-Clothes
-Shoes
-Electronics
-Computers
-Even golf clubs
-Cars
-Trucks
-Plastic jars
A country without factories looses the know-how to do things. The new economy failed with the tech bubble, and failed again with the service economy (finance).
Why don't we let everything go; it would be simpler and we would not need as many MBA's. Harvard could be transformed as a training center for Wall-MArt or Mc Donald.
By the way, I am happy that your father work for a truck corporation. At least, he built real products for real businesses which I hope will still be around in the 21st century.
SimbaDogg @ Sep 24th 2008 11:55PM
@stratojet
you're a clown if you think that the US govt hasn't supported the big three in years past. Not saying that it has supported them as much as germany or japan has supported their respective mftrs...but to assume that the govt hasn't supported the B3 is naive at best. think about it, its in the best interest of the US economy that those 3 huge US firms are successful, if they're not its B-A-D news for the US.
Glenn @ Sep 25th 2008 2:25AM
When you talk about "free market" you are not correct when it come to Japanese cars. Japan has a totalitarian economic system. The government is EXTREMELY involved with those car companies. Honda, in fact volated the government when it went beyond its mandate to build "engines and motorcycles" and even today has almost no market share in Japan when it comes to cars.
With the Prius .. wonder why the Honda version looks almost identical ... wonder where that technology came from. Toyota would be upset, but Toyota did not pay for the technology either -- oh Papa Bear did.
Rocketboy @ Sep 25th 2008 9:09AM
Umm, the problems with Freddy and Fannie just show that the gov't has no business mandating how markets work.
bakka @ Sep 25th 2008 10:36AM
Take a look at the business world, they all talk about free markets. Nobody practices the free market. The corporate world are all socialists. The tax payer PAYS!
collier.chin @ Sep 24th 2008 6:01PM
umm...Lehman Brothers didn't get bailed out...it filed for bankrupacy and is being sold off piece by piece to other companies around the world
foo @ Sep 24th 2008 6:04PM
isnt lehman and some other investment firm getting investigated by the FBI for something shady with the recent bail out plan?
refugee7 @ Sep 24th 2008 7:47PM
Lehman declared bankruptcy, and now Barclay's paid a rock bottom price to scavenge what they want from Lehman's.
tekd @ Sep 25th 2008 9:04AM
Yeah it's rather sad how clueless that statement was. Autoblog's apparently edited it after realizing how retarded it is to claim that a bankrupt company that received $0 in bailouts got a better deal than the auto industry, lol.
Too bad the sentence they have left is still equally ridiculous, since AIG got an $85 billion loan, but that loan has an 11.5% interest rate (that will likely go up since it's based on LIBOR+8.5%) plus an up front 2% fee on top of that, plus the government gets to take 80% of the company's equity. Which makes it about the worst possible loan ever to have existed in the universe.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aiJOvupYlCQ4
That article should let you know pretty clearly that the auto makers are getting a much, much nicer bailout loan than AIG is getting. AIG's loan is basically forcing them to either sell off almost the whole company to pay off the loan.
And Fannie Mae and Freddie Mac didn't get much better deals...they were both just seized by the US government, leaving shareholders with virtually worthless stock.
How you could think that government seizure of your company, or a super-high interest rate loan where the government will also take 80% of your company, is a better bailout than super low interest rate loans for decades is beyond me.
Allan @ Sep 24th 2008 6:02PM
So I'm in debt and haven't planned for the future properly like I should have... where's my low interest loan from the government?
That One Person @ Sep 24th 2008 7:33PM
Yeah but you don't employ hundreds of thousands of people. You also don't support local economies like the Big 3 do.
alex @ Sep 24th 2008 7:45PM
I'm really suprised at the amount of ignorance in these comments. It doesn't matter what you think of the Big 3... the American economy depends on their survival.
Sure these companies have been mismanaged, so it's easy to say they had it coming... but the hundreds of thousands of people who stand to lose their jobs didn't have it coming as they didn't make the managerial decisions.
But the impact spreads far beyond Big 3 employees. It is estimated that 1 in 10 jobs in this country is associated with the auto industry. If the Big 3 go under, so do suppliers and thousands of dealerships. And what about ad agencies like Campbell Ewald who rely heavily on auto companies for revenue? What about shipping companies that import parts and vehicles for the Big 3? What about the companies contracted for janitorial work, lawn care, and snow removal at Big 3 facilities? What about restaurants, shops, hotels, etc located near Big 3 facilities?
And when all those people lose their jobs, they won't have money to spend at the places they usually spend their money at.
But wait, there's more...
We all know our financial institutions our in horrendous shape. Did any of you stop to wonder why our financial institutions were lobbying the government to give these loans to the big 3? For those who can't figure it out, those same institutions have loaned billions to the Big 3. They can't afford the Big 3 to default on those loans, and they surely can't afford for people who would lose their jobs as a result of a Big 3 collapse defaulting on their loans and mortgages. If the Big 3 collapse, they will take banks down with them.
Quit bitching about how it's YOUR tax money going to these companies and realize that the economic fallout from a collapse of the Big 3 would cost you far more.
And also, most countries provide grants to private companies for research and technological innovation. Case in point, Japan funded the development of the Prius for Toyota. The US govt also used to fund research for the Big 3 to make more efficient vehicles, but Cowboy Bush cut that funding. So you could almost view this as our government making up for the funding they should have been giving for the last 8 years and not a bailout.
foo @ Sep 24th 2008 6:03PM
wow that's great, fund companies that cant build cars people want...just as good as bailing out wall street for giving out bad loans