Lobbying efforts from General Motors, Ford and Chrysler paid off last Wednesday as Congress approved $25 billion in government loans designed to refuel growth in the declining auto industry. According to a report from foxnews.com, the House approved the loans as part of a larger spending bill intended to help the industry refurbish plants for the production of fuel-efficient vehicles and to develop advanced batteries and gas-electric hybrids.
The loans, which were authorized in last year’s energy bill but not funded, are aimed at helping automakers meet costly new fuel-efficient standards of at least 35 miles per gallon by 2020, a 40% increase. Auto suppliers are also eligible for the loans.
Loans will be issued from the government at discounted rates and administered by the Energy Department, which is currently writing regulations for the program. The spending plan would enable the department to speed up the rule-making process. Companies would apply to the Energy Department for a loan, so it was unclear how the funding would be divided.
The companies hope to receive the loans at government interest rates of about 5%, which would save them about $100 million a year for every $1 billion in loans. Auto manufacturers have poor bond ratings and would only qualify for double-digit interest rates.