WASHINGTON -(Dow Jones)- Democratic Party leaders on Capitol Hill are mulling a proposal to include $25 billion in emergency low-cost loans to the auto industry in a second economic stimulus package, Sen. Debbie Stabenow, D-Mich., said Wednesday.
The loans would be quickly issued to U.S. auto makers to help them get through the financial crisis, Stabenow said. The loans would be on top of the $25 billion loan package signed into law this fall under a program to help companies modernize plants. Those loans haven't been released yet.
Under the proposal currently being studied, the new loans would have few requirements attached to them, Stabenow told Dow Jones Newswires.
"It would be my hope that this would be done similar to other areas in the financial recovery package, where it's more of an open line of credit to be able to help them through this financial crisis," Stabenow said. Detroit's Big Three auto makers of General Motors Corp. (GM), Ford Motor Co. (F) and Chrysler LLC are suffering from steep sales declines and are increasingly struggling to raise money in credit markets.
House Speaker Nancy Pelosi, D-Calif., said in a radio interview Wednesday that Congress may have to provide additional assistance to struggling U.S. auto makers, although she did not offer details.
Stabenow, who represents the state where the auto makers are based, did not rule out the loans being used to facilitate a possible merger of GM and Chrysler.
She said getting such a package passed before the end of the year would depend largely on whether it had the support of President George Bush. Democratic leaders will likely meet with Bush to gauge his support for an economic stimulus, Stabenow said.
Additional assistance for the struggling industry could be politically risky, considering the public opposition to the government's plan to rescue Wall Street firms. Additionally, a GM-Chrysler merger could result in the loss of thousands of manufacturing jobs as those firms consolidate.
Alan Reuther, chief lobbyist for the United Auto Workers union, said the union is pushing for a $25 billion loan package that would be directed to retiree health-care accounts, to which auto makers must contribute.
"We think this would both provide significant assistance to the companies but also ensure the assistance is targeted at helping the retirees," Reuther told Dow Jones Newswires. Such a plan would relieve auto makers of an "enormous financial obligation.," he added.
Stabenow said that if the economic stimulus package is not passed during President Bush's remaining months in office, she is confident one would be passed once President-elect Barack Obama takes office. Obama has voiced support for more aid to the auto industry.
"We finally are going to have a president that values American manufacturing and understands the importance of the American auto industry," Stabenow said. " So we start from a very different place."
In addition to the loans, Stabenow said, other moves being considered by federal lawmakers include writing legislation to free up the loans approved this fall to help auto makers meet new fuel-economy standards. The Energy Department has said it could take six to 18 months to complete the rule-making process for the program and make those loans available.
Source: http://money.cnn.com/news/newsfeeds/articles/djf500
