Big Three Back Off Bigger Loan Program

Posted by: David Kiley on September 10, 2008

Officials of Ford and General Motors confirmed a report in The Detroit News that industry lobbyists have backed off the $50 billion in loans it sought over three years to make critical investments in favor of a one year $25 billion loan package it believes will clear both parties and houses of Congress before the legislature ends its current session.

The compromise that’s in the air could set off a new round of debate in Michigan between Democratic Presidential nominee Barack Obama and GOP nominee John McCain. Michigan is a critical, swing state. Obama has favored the increased $50b, while McCain has stopped short of supporting anything more than the $25 billion loan package that was part of the energy bill passed last December.

That bill calls for raising fuel economy standards, and automakers have griped that they are cash-strapped in the middle of a recession, and ill-equipped to make the kinds of investments they need to in new engine plants, plant conversions and technology.

The industry seems to have gotten caught in a political backdraft of the Fed’s bailout of Fannie Mae and Freddie Mac, after a controversial bailout of investment bank Bear Stearns.

Michigan voters connected to the auto industry are in a position to extract the best commitments from the Presidential candidates in their new would-be administrations, as both look at the state as a must-win.

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