Download Locations

• Open CRS (User submitted)
• WikiLeaks

Summary

U.S. automakers are facing a myriad of unfavorable conditions, including a worsening economy and credit crunch that have dampened consumers' demand for new vehicles, high legacy costs, increased competition from foreign automakers, and stricter Corporate Average Fuel Economy (CAFE) standards. The last concern -- the regulatory cost of higher fuel economy standards -- led Congress to consider various federal programs, including grants and loans, to help automakers with the increased cost to comply with the new standards. In December 2007, the Energy Independence and Security Act of 2007 (P.L. 110-140) authorized a program to provide loans to automakers and parts suppliers for the production of fuel-efficient cars and light trucks. The law authorized up to $25 billion in total loans. However, funds were not appropriated for the loan program until September 30, 2008, when the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act (P.L. 110-329) was enacted. This act appropriated $7.5 billion to cover the subsidy cost of up to $25 billion total in loans, as well as $10 million for program implementation. The act further directed the Department of Energy (DOE) to implement an interim final rule within 60 days of enactment -- this deadline would be November 29, 2008. On November 5, 2008, DOE announced an interim final rule for the program. The rule will be effective the date it is published in the Federal Register (when this will happen is unclear). Once published, DOE will have a 30-day public comment period on the interim rule before issuing the final rule for the program. Loan funds will be separated into tranches, with applications for each tranche due every 90 days, until all loan authority has been expended. The application deadline for the first tranche is either the effective date of the program (the day it is published in the Federal Register), or December 31, 2008 -- the rulemaking documents are contradictory on this point. To qualify for a loan, an automaker must have an average fleet fuel economy no lower than that in Model Year 2005. Also, eligible facilities (either vehicle assembly or part making) must be located in the United States. Specific projects must result in the production of vehicles that achieve at least 25% higher fuel economy than Model Year 2005 models with similar size and performance. Further, applicants must be able to demonstrate their financial viability over the life of the loan -- 25 years. This last requirement may prove to be a significant barrier to loan approvals under the program.

XML