GM, Ford Seek $50 Billion in U.S. Loans, Doubling First Request
By Jeff Green
Aug. 22 (Bloomberg) --
General Motors Corp., Ford Motor Co., Chrysler LLC and U.S. auto-parts makers are seeking $50 billion in government-backed loans, double their initial request, to develop and build more fuel-efficient vehicles.
The U.S. automakers and the suppliers want Congress to appropriate $3.75 billion needed to back $25 billion in U.S. loans approved in last year's energy bill and add $25 billion in new loans over subsequent years, according to people familiar with the strategy. The industry is also seeking fewer restrictions on how the funding is used, the people said.
GM and Ford lost $24.1 billion in the second quarter as consumers, battered by record gasoline prices, abandoned the trucks that provide most of U.S. companies' profit and embraced cars that benefit overseas competitors such as Honda Motor Co. U.S. auto sales may drop to 15-year lows this year and fall even more in 2009, analysts have said.
``Next year is going to be a make-or-break year in terms of survival,'' said Mirko Mikelic, senior portfolio manager at Fifth Third Asset Management in Grand Rapids, Michigan, which oversees $22 billion in assets, including GM and Ford bonds. ``Any help like these government loans would be a huge boost.''
Standard & Poor's said Aug. 19 that U.S. light-vehicle sales will fall to 14.2 million units this year from 16.1 million in 2007 and drop again to 14.1 million next year. The ratings company said there is a 20 percent chance that this year's sales will be as low as 13.6 million and 11.7 million next, presenting an ``overwhelming challenge'' for U.S.-based companies.
``Our plans, which require significant investments, are at risk because of limited access to capital,'' GM spokesman Greg Martin said, declining to comment on whether GM is seeking more than the original $25 billion. ``This program will open capital that is necessary to make sure our transformational plans continue at full speed and give us the best chance to succeed.''
Ford spokesman Mike Moran said the automaker had no comment on any funding beyond the $25 billion already approved.
Congress needs to appropriate about $3.75 billion in funding to cover the upfront cost of the government loans, according to a July 25 estimate in a letter to House and Senate leaders. The letter was sent by more than 40 members of Congress urging support on the issue.
To contact the reporter on this story: Jeff Green in Southfield, Michigan at email@example.com