Loans Expert

While much of Washington’s attention this past weekend focused on dealing with the crisis in the financial markets, Congress also made a move that could benefit much of Michigan.

A huge $634 billion federal spending bill that cleared the Senate on Saturday includes a $25 billion line of credit for U.S. automakers.

The deal will allow the Energy Department to provide 25-year loans at an expected interest rate of 5 percent to General Motors Corp., Ford Motor Co. and Chrysler LLC. The loans will provide the capital that the companies need to push ahead with development of gas-electric vehicles, more fuel-efficient engines and plug-in electric cars.

Without the federal loans, the automakers would have a much more difficult time raising the money because of their current poor bond ratings, weak sales and a tight credit market. They likely would have to pay double-digit interest rates to secure the funds they need.

The federal loans are not a handout to the car companies, but rather will be paid back to taxpayers with interest. We also see the loan package as an investment both in the environment and in Michigan.

Helping to fund development of alternative-fuel vehicles will help put those cars on the road more quickly, leading to decreased emissions as well as lessening our dependence on oil.

The loans also will mean that more people will continue working in Michigan. Not only will employees of the Big Three have greater job security, but companies throughout the state which supply parts or do other business with the automakers are likely to benefit as well. And everyone in Michigan will gain by the increased tax revenue going into state and local coffers.

While some officials are dismayed that the Energy Department predicts it will take at least six months to implement the loan program and make capital available, we’re glad that substantive help is on the way for Michigan’s beleaguered automakers.

Related posts:

• Energy Department Readies $25 Billion in Auto Loans
• Obama says he would act fast on $25 bln auto loans
• Ford Among First to Get Loans for More Efficient Cars
• Detroit Three say they need billions in federal loans
• Auto loans industry may take up to 18 months

Tags: Auto Loans