GM urges Congress to fund loan program

The GM leader says the loans are not a bailout.

WASHINGTON (AP) — General Motors Corp.’s chief executive on Friday urged Congress to provide funding for a $25 billion loan program and give flexibility to the auto industry to use the money to improve fuel efficiency.

GM Chairman and CEO Rick Wagoner asked lawmakers at a Senate energy summit to fund a provision in last year’s energy bill to allow the loans to be extended and to draft regulations for the program.

“If that is done, then I think the $25 billion included in the energy bill last year would be very helpful in enabling the industry to move more rapidly,” Wagoner said.

Sen. Bill Nelson, D-Fla., said the incentives to retool the industry were necessary, but expressed doubts it would be enough to help the industry’s long-term financial future.

He criticized Detroit automakers for traditionally opposing increases in fuel economy standards.

“That’s not going to be enough,” Nelson said. “You all are going to come to us with some kind of rescue package and ask us to rescue you.”

Wagoner said they simply were asking for the program to be funded.

“I’m not here today ... asking for any bailouts,” he said.

Wagoner also asked for additional flexibility in receiving the loans so it could be applied to a broad range of fuel-efficient vehicles, not just those vehicles that would get a 25 percent increase in fuel efficiency, as the legislation suggests.

Industry officials and Michigan lawmakers had discussed building support for up to $50 billion in loans over three years, but Wagoner told reporters they would seek $25 billion to help pay for the modernization of plants and the development of fuel-efficient vehicles.

“That is the entire focus of our efforts, he said.

GM is developing an extended-range plug-in electric vehicle called the Chevrolet Volt, which it hopes to launch in 2010. The vehicle is heavily dependent upon advanced battery technologies, which could be helped by the loans.

Congress authorized $25 billion in loans in last year’s energy bill but has not funded the program. The loan program was intended to help the industry meet new fuel economy standards of at least 35 miles per gallon by 2020, a 40 percent increase.

The government interest rate for the loans would be around 5 percent, providing about $100 million a year in savings for the companies for every $1 billion in loans. With poor bond ratings, the Detroit companies would only qualify for double-digit interest rates on the open market.