The US automotive industry received a boost yesterday (24th September) after a $25 billion direct loan programme was approved by the House of Representatives.

The initiative, which forms part of a broader government spending bill, is designed to help automakers retool plants and develop technology to provide more fuel-efficient vehicles.

It should aid their attempts to meet new fuel economy rules, which state that fleets must average 35 miles per gallon by 2020 - a move which experts predict will cost the industry $80-$100 billion.

However, the battle appears to be only half-won after it was also confirmed that the issue of how the money will be distributed will not be addressed until after the presidential elections.

Rebecca Lindland, an Analyst at Global Insight, told USA Today: "It's like getting an early Christmas gift and not being able to use it until spring.

"The value of this can't really be evaluated until they know the parameters. I have to reserve judgement until the explanation for how they can use this is clear."

Nevertheless, the loans look certain to provide automakers and suppliers alike with funding which incorporates lower interest rates than they would be able to secure from private sources.

David Cole, Chairman of the Center for Automotive Research, added: "I think they are happy to take their chances with however the rules are written.

"It frees up capital that they have to have to drive into new technology, which they need to survive."



Source:

House approves $25 billion loan program for automakers (24/09/08)
http://www.usatoday.com/money/autos/2008-09-24-automakers-loan-program_N.htm