Ford Fears Worst for Auto Loan Timing

Echoing a worst-case scenario condemned by politicians, Ford Motor Co. anticipates it could take more than 18 months for low-interest federal loans to trickle down to auto makers.

A spokesman with the office of Sen. Debbie Stabenow (D-Lansing) says the U.S. Department of Energy, which will disperse the funds, chafes at the projected timeline for the distribution of a $25 billion package approved Monday by the Senate.

“We’re trying to push it as quickly as possible, perhaps the next six months or earlier, possibly by the end of the year,” he says. “The DOE said it could take up to 18 months. That’s not acceptable.”

Ford spokesman Mike Moran says Rep. John Dingell (D-MI) sent a letter in July to the DOE in hopes of expediting the $25 billion loan package approved Monday by the Senate. The letter, obtained by Ward’s, says “commodity price pressures and regulatory demands for more fuel-efficient vehicles have led to a sudden economic disruption of unprecedented proportion for the domestic automobile industry.”

Notes Dingell: “These conditions warrant quick action.”

Although Stabenow vows to fight for quicker distribution of the loans, a statement released by Ford indicates the auto maker is not counting on near-term access to the funds.

GM’s Volt electric car could benefit from government loans.

“We have significant doubts about whether distribution of the loans by January 2009 is realistic, because there are a number of legal and administrative requirements with which the (DOE) must comply,” the statement says.

“We think you’ll have to show some evidence of your attempt to invest, and you’ll have to show quite a bit,” Moran concedes.

He declines to reveal how Ford would invest money from the government should it secure a loan, but does say the funds could be used toward the auto maker’s plan to build small, fuel-efficient vehicles based on its European lineup.

“We’ll have to wait until we see the criteria,” he says.

The Energy Independence and Security Act stipulates the money must be used for “advanced vehicle technology.” Section 136 of the act defines an advanced-technology vehicle as a light-duty vehicle that meets Bin 5 Tier II emission standards or lower and any new emission standard in effect for fine particulate matter and achieves at least 125% of the average base year fuel economy, calculated on an energy-equivalent basis, for vehicles of a similar footprint.

Additionally, the act says the funds only can be used to retool facilities that have “been in existence for at least 20 years.”

Eli Hopson, Washington representative for the Union of Concerned Scientists, says he would like to see the loans be used toward the advancement of a variety of fuel-saving technologies.

“We’d like to see the best vehicles the manufacturers could produce, including some hybrids, plug-ins, and (hydrogen) fuel cells,” he tells Ward’s. “But also using conventional technology and using it in a fuel-efficient package.”

Like Ford, other auto makers are mum on their plans.

General Motors Corp. spokesman Greg Martin says the auto maker won’t know exactly where to apply the loan money until the DOE writes the fine print, which he says should be completed in 60 days.

“The critical point here is that we now have access to capital at a low interest rate,” he says. “The credit markets have been slammed shut so this is very important.”

There are projects GM could direct the money to, including the recently announced plant in Flint, MI, which will produce small gasoline engines for the Chevrolet Volt electric vehicle and Cruze small car, or the Hamtramck, MI, facility that will assemble the Volt.

Chrysler LLC is taking a wait-and-see approach to the loans, but a spokeswoman hints the government funds could be applied toward its recently announced electric-vehicle program.

“We believe the advanced technology loan program supports the technology path that Chrysler is on,” Linda M. Becker, senior manager, public policy-communications & Washington affairs, says in a statement.

Asian auto makers, which largely have fared better than their domestic counterparts during the recent economic downturn, are vague on their plans for the loans.

Toyota Motor Sales U.S.A. Inc. is biding its time, but President Jim Lentz suggests the auto maker might have an interest in tapping into the loans if terms are favorable.

“I don’t know if we’d take advantage,” he tells Ward’s. “We’ll just have to wait and see.”

Ed Cohen, vice president-government and industry relations, American Honda Motor Co. Inc., says the auto maker “did not either advocate for or against the legislation,” but hopes its suppliers will benefit from the loans as they are eligible under terms of the act.

“At this juncture, I don’t think anybody’s even focused on whether we would apply for the funds,” Cohen tells Ward’s. “The two things that are important are (that they) not be discriminatory (i.e., every OEM is eligible) and second, that suppliers are eligible, and according to the original 2007 law, they are.

“The suppliers are facing the same issues that auto companies are, and we are interested in a healthy U.S. industry at both the OEM and supplier level,” he says.

Nissan North America Inc. spokesman Fred Standish says, “How this bill may affect Nissan is unclear so we cannot comment.”

Meanwhile, United Auto Workers President Ron Gettelfinger says the bill will lead to new jobs.

“It’s a huge victory for our members, for U.S. manufacturing companies, and for American consumers,” Gettelfinger says in a statement. “This is a smart investment which will speed the introduction of more fuel-efficient vehicles and also create tens of thousands of good-paying manufacturing jobs.”

Gettelfinger joins Dingell and Stabenow in asking that the DOE expedite the loan process.

“There is absolutely no reason to delay this vital program, and it shows why America needs a change in direction,” he says. “This (Bush) Administration knows how to move fast when it wants to. It’s a disgrace that (it) can’t be bothered to take decisive action to help American workers and American companies.”

– with Ward’s Staff

[email protected]