Auto firms in line for $25 billion loans

After bailing out the banking sector, the US government is now on the verge of offering loans of up to $25 billion to help US automobile manufacturers build greener vehicles.  ┬á The House of Representatives has already voted to back a spending bill that includes a low interest loan to auto makers, and the bill is expected to pass in the Senate this week. Its sponsors hope that President Bush will sign it off by 1 October, when the government begins its new financial year. ┬á┬á The US government has only ever bailed out an auto manufacturer once, when Chrysler was offered a loan of $1.2 billion in 1980.┬á┬á General Motors, Ford, and Chrysler have been pressing for the loans to help the industry re-equip assembly plants to build more fuel-efficient vehicles. The loans were authorized in last yearÔÇÖs energy bill, but Congress has not yet funded the plan.┬á┬á The funding provision was included in the current bill to help auto companies and their suppliers meet new fuel-efficiency standards of at least 35 miles per gallon by 2020, a 40 percent increase in gas mileage. ┬á┬á The government interest rate for the loans would be about 5 percent, compared with the double-digit rate the companies would expect to pay on the open market.┬á┬á Falling sales, rising production costs and a steep rise in the cost of borrowing have made life difficult for the US auto industry, which has fallen behind its Asian rivals in the production of the smaller, cleaner vehicles the public is now demanding as drivers turn their backs on gas-guzzling trucks and SUVs.┬á┬á Senator Carl Levin, D-Mich., said in a statement that the funding "should help to keep auto jobs in Michigan and in the US and begin moving us toward the advanced vehicle technologies that are critical to our companies' competitiveness in the global market place."  ┬á┬á┬á*┬á┬á┬á┬á┬á┬á┬á┬á┬á *┬á┬á┬á┬á┬á┬á┬á┬á┬á *┬á