Suppliers Join Auto Industry Efforts to Secure Federal Loans

The U.S, auto industry’s request to Congress for $25 billion in low-interest, government-guaranteed loans set aside in last year’s energy legislation to improve fuel efficiency receives a lobbying blitz today from an organization of vehicle suppliers.

“All of our heavy hitters are up on the Hill,” says Amy Garcia, a spokeswoman for the Motor & Equipment Manufacturers Assn., a lobbyist for U.S. parts suppliers.

As with the auto makers, suppliers would receive loans to retool plants for fuel-efficient vehicles featuring advanced technology, such as GM’s Chevrolet Volt extended-range electric vehicle.

Specifically, MEMA says suppliers would use the money to add new facilities or convert existing ones to more flexible operations supporting a wider range of options required under the legislation.

These include lightweight materials; dual-clutch transmissions; key enablers for hybrids and hydrogen fuel-cell vehicles; turbocharged gasoline- and diesel-powered vehicles; as well as components necessary for the use of cellulosic and non-carbon fuel sources.

Garcia says MEMA leaders have scheduled 41 meetings for today with a gamut of key lawmakers.

Earlier in the week, a group of governors from mostly vehicle-producing states sent letters to Congressional leaders pushing the industry loans, which have met little opposition but face a looming deadline and potential competition from the struggling financial industry.

The governors called the money “critical investments” that would “create jobs, reduce greenhouse-gas emissions and increase our nation’s energy independence.”

The release of the loans faces a looming deadline because Congress operates on an abbreviated schedule this month. Greg Martin, a General Motors Corp. spokesman in Washington, says a decision could come as soon as Sept. 22.

“The bad news is they have only three weeks to get this done. The good news is they only have three weeks to get this done, so it looks like next week will be it,” he says.

GM Chairman and CEO Rick Wagoner earlier this week said the industry will not pursue more than the $25 billion already earmarked in the Energy Independence and Security Act, a piece of legislation that also increased the corporate average fuel-economy rule to at least 35 mpg (6.7L 100/km) by 2020.

“As an industry, (we’ve) agreed the original amount funded, $25 billion, is a fair amount to help us make the investments we need,” Wagoner said at GM’s centennial celebration held at the auto maker’s world headquarters in Detroit. “It is the right way to go.”

However, GM North America President Troy Clarke admits the public may express reticence over the auto loans after watching their tax money go to bail out big Wall Street corporations.

“I realize it may be difficult in the eyes of some of the American people,” he tells Ward’s. “We must do a better job of saying this is a very different deal. It’s two different spaces, two different issues. And the better we keep that separate in people’s minds, the better opportunity we have.”

The financial industry’s meltdown continued this week with the Federal Reserve on Tuesday lending $85 billion of taxpayer money to American International Group Inc., an insurance company and financial-services firm racked by the mortgage crisis.

On Monday, the government refused to bail out Lehman Bros. Holdings Inc., forcing the investment bank to file for bankruptcy and sell off some of its most coveted assets.

And over the trailing weekend, broker Merrill Lynch & Co. was forced into an acquisition by Bank of America Corp. Another bank, Bear Stearns & Co., has been acquired by banker JP Morgan Chase & Co. with assistance from the U.S. Treasury Dept. and billions of taxpayer dollars.

Additionally, mortgage heavyweights Freddie Mac and Fannie Mae each could receive up to $100 billion from the Treasury, which has assumed oversight of the organizations. Many Wall Street watchers are holding their breath in anticipation of more fallout from the sub-prime mortgage industry’s collapse.

Whatever may occur, Clarke insists the auto industry deserves the loans.

“There is a benefit to the American public by accelerating the implementation of technology that accomplishes the objectives of the Energy Act,” he says, citing the legislation’s goals of enhancing energy independence, lowering the price of fuel and reducing carbon-dioxide emissions.

“That is of significant value to the American public.”