Senator Bingaman Says Auto Loan Program Not to Be Limited to 30% of Facility Cost
29 September 2008
The $25-billion loan program for automakers and suppliers to retool older facilities, passed by the Senate on Saturday and heading to President Bush for signature, does not intended to cap loans to 30% of the cost of a facility as reported here earlier (earlier post), according to Senator Jeff Bingaman (D-NM), Chairman of the Energy & Natural Resources Committee.
Loans will be uncapped and can go up to 100% but are typically limited by regulation to 80% of total costs, according to Michael Carr, Counsel for the Committee.
Finally, I have been told there may be some confusion about the terms of the loans as the provision creating the loan program references the “activities” that are the subject of a grant program also authorized in the same section of EISA. The grant program is limited to 30 percent of the costs of a facility. This is a fairly typical cost share for grant programs. Some have raised a question as to whether this 30 percent cap should also apply to the loan program. That is not the way I read the language of the law and was certainly not our intent in writing the provision.
Moreover, I would argue that it would dramatically limit the effectiveness of the program as it would require companies to go to tight credit markets for 70 percent of their financing, precisely the problem we were seeking to remedy with the creation of the loan program. While I don’t expect the Department of Energy to take this limited view of the program, I wanted to go on record here to help alleviate any confusion that may exist. I look forward to working with the Department to aid them in getting this program up and running.—Senator Jeff Bingaman
The new bill providing loan funding for industry picks up on qualifying activities listed under the Advanced Technology Vehicles Manufacturing Incentive Program, passed in the EISA 2007 bill (Sec. 136). Section 136 however, specifies a 30% cap on awards.
The short of it is that capping loans at 30% of costs would be weird. I don’t think we’ve done that before.—Michael Carr
The loan program is applicable to automakers and component suppliers, including battery makers, Carr emphasized.
TrackBack URL for this entry:
Listed below are links to weblogs that reference Senator Bingaman Says Auto Loan Program Not to Be Limited to 30% of Facility Cost: