Energy Department Readies $25 Billion in Auto Loans

The U.S. Energy Department said today it has set the interim rules for how automakers can apply for as much as $25 billion in federal loans to help cover the costs of producing more energy-efficient vehicles.

``Issuance of this interim final rule opens the process for automakers and component manufacturers to immediately apply for government funding under the Advanced Technology Vehicles Manufacturing Incentive Program,'' Energy Secretary Samuel Bodman said in an e-mailed statement.

The department completed the guidelines in about half the 60-day period required by Congress, potentially giving carmakers quicker access to funds. Members of Congress, including House Energy and Commerce Committee Chairman John Dingell of Michigan, pressed the department to move quickly on the rules to help struggling U.S. automakers.

The three largest U.S. automakers, Ford Motor Co., General Motors Corp., and Chrysler LLC could submit applications for government loans as soon as the rule is published in the Federal Register. The interim guidelines do not limit how much any one loan applicant can receive of the $25 billion.

``We're pleased to hear the Energy Department is moving quickly,'' said Ford spokesman Mike Moran. ``We're looking forward to seeing the rules when they appear next week.''

Last year's energy bill said that the funding would have to be used on programs to boost fuel efficiency by at least 25 percent.

Recipient Rules

Bodman must determine that any recipient is ``financially viable'' without additional federal funding and able to make interest and principal payments on the loans, the rules state.

The program ``provides for grants and loans to eligible automobile manufacturers and component suppliers for projects that re-equip, expand and establish manufacturing facilities in the United States to produce light-duty vehicles and components for such vehicles, which provide meaningful improvements in fuel economy performance,'' according to the rule.

Funding could start flowing to the loan applicants as early as the end of this year.

GM, hammered by the worst auto market in 25 years, needs U.S. aid because ``time is very short'' to stop its collapse, Roger Altman, the former Treasury official advising GM in merger talks with Chrysler LLC, said in an interview today.

Source: http://www.bloomberg.com/apps/news