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Wednesday, October 1, 2008

Done Deal- Bush Approves $25 Billion Auto Loan Program

WASHINGTON — Automakers are expected to accelerate their push to invest in new technologies to meet stringent new federal fuel economy standards, after President George W. Bush on Tuesday signed into law a spending bill that includes a $25 billion loan package to help the troubled industry.

The $25 billion loan package is the biggest federal subsidy for the auto industry since the 1980 bailout of Chrysler. The loan package was authorized — but not funded — in a 2007 energy law that requires automakers to improve the fuel efficiency of their vehicles by 40 percent by 2020.

The president's signature was the final step in the loan approval process and comes after a massive lobbying effort on the part of General Motors, Ford and Chrysler. On Monday, GM chairman and CEO Rick Wagoner took the unusual step of submitting to a videotaped interview on the corporate GM FastLane blog, pressuring the government to approve the loan package.

"Yeah, I have to admit I chuckle when people make this claim that the automakers are asking for help from Washington to get out of a difficult time," said Wagoner. "In fact, the Energy Security Bill of 2007, which was passed last year, included some big challenges for our industry, including us, which is to increase our fuel economy of our vehicles by 40 percent over the next decade or so."

Putting the onus on lawmakers, Wagoner added: "It was acknowledged that it would require huge investment."

The $25 billion in loans, he said, "from our perspective, it's fulfilling the other half of the deal." GM has said that the loans will help to speed the development of the electric 2011 Chevrolet Volt.

In a TV appearance on Conversations with Michael Eisner on Tuesday, Chrysler chairman and CEO Bob Nardelli said, "There is no one magic element in this recovery plan." Nardelli did not discuss the loan package, instead pointing out that "the product cadence at Chrysler is strong," with a new Chrysler 300, Dodge Charger and new Jeep due out in 2010.

Nardelli also discussed future technology innovations that the automaker is working on, such as a split-screen on the instrument panel that would allow the driver to consult the navigation system while the front passenger watches a movie.

What this means to you: The $25 billion loan package is only part of the solution, as the automakers in the Motor City are well aware.