Fuel-efficient carmakers want to ride on loan guarantees

Font Size

Print

Feedback

Email

Discuss

Related Articles

M&M set to roll out bikes in 2010VW pitches for 10% market share by ’14Skoda to realign products in IndiaMaruti mulls smarter, greener 800

: A top General Motors executive has said that automakers were “deserving” of as much as $50 billion in government-backed loans so that they can build more fuel-efficient cars.

GM’s vice-chairman, Robert A Lutz, said the car companies need money to retool their plants but probably cannot raise enough capital on their own because of the tight credit markets. He said the automakers have already made considerable progress in transforming themselves and that the government should help them proceed faster.

“The American auto industry is deserving of government loan guarantees,” Lutz told reporters at an event near Chicago where GM showed off its 2009 line up. “We have done a whole bunch of things that people said, ‘Why aren’t you doing this?’ “

The automakers, along with the United Automobile Workers union and Michigan lawmakers, are urging Congress to appropriate $3.75 billion to back the $25 billion in loans authorised last year.

They also want more money—up to double the original amount, given the sudden jump in consumer demand for fuel efficiency—and they are urging Congress to act by the end of September so that the money can be available next year. Critics have denounced the loans as a bailout.

Detroit carmakers have announced plans to revamp numerous truck plants so that they can build the smaller cars and crossover vehicles that have become scarce at many dealers. The cost of each conversion is significant, ranging from $75 million at a Ford plant near Detroit that already had a recent major overhaul to several billion dollars at other facilities.

Sales of pickups and SUVs plummeted this year as gasoline prices climbed above $4 a gallon in much of the United States. In July, large SUV sales were down 43%, and sales of full-size pickup trucks declined 28%. Automakers have been offering substantial discounts on some models and shutting down the plants that make them to keep inventories from growing larger.

But Lutz said that interest in trucks had begun to rebound and that big vehicles “still represent a great opportunity to register sales.” Since mid-July, the average price of regular gas nationwide has fallen 45 cents, or 11 %, according to the AAA motor club.

“We’ve been hearing from some of our dealers that pickup sales have bottomed—same with SUVs,” Lutz said. “There has been some resurgence of demand for full-size pickups and sport utilities. Many people still simply need to buy a truck.”

Still, August is expected to be dismal for GM and most other automakers. Edmunds.com on has projected that total sales for the month would be 14.4% lower than a year ago and that GM’s sales would be down 27.5%. Sales would also be down at Chrysler, Ford and Toyota, Edmunds said.GM said it was seeing a good response to its current promotion, which offers “employee pricing” to all buyers, but Edmunds said big discounts had been overshadowed by the high gasoline prices and a sluggish economy.

“Over all, the programme has not been nearly as effective as its first implementation back in 2005,” the director of industry analysis at Edmunds, Jesse Toprak, said.The falloff in truck sales has been devastating to the Detroit automakers because those vehicles historically have generated the most profit. Lutz said small cars would become considerably more expensive, filling some of the void created by the evaporation of big profits from trucks.