Ford, GM, Chrysler Set for $25 Billion in Government Loans
Following a meeting earlier this week with House of Representatives speaker Nancy Pelosi, the ‘big three’ US automakers Ford, GM and Chrysler, are optimistic about their prospects of receiving a multi-billion dollar loan. Pelosi told reporters in Washington yesterday that she plans to unveil a $25 billion finance package next week, which will probably be added to a ‘stopgap’ government funding bill.
When (and if) finally approved, much of the loan will be used to convert production to smaller, more fuel efficient vehicles, which are increasingly popular in Europe as a result of the escalating energy crisis. The money will also be added to existing U.S. Advanced Battery Consortium grants to help fund the development and manufacture of next-generation battery technology, such as those used in the forthcoming Chevrolet Volt.
Speaking after the meeting, Alan Mulally of Ford and Chrysler’s Robert Nardelli said they were “encouraged” and “pleased” after pitching for the massive loan, likely to come in the form of low-interest financing. The reaction is unsurprising given the continuing poor financial performance of the sector, amid heavy operating losses and double-digit interest rates in a tightening credit market. The looming crisis in the car industry has led some commentators to speculate that, without the loan, U.S. automakers might struggle to survive long enough to produce plug-ins and other fuel-efficient models that can compete with existing Japanese offerings like the Toyota Prius.
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Image Credit – AndrewEick via flickr on a creative commons license