In a special session on Saturday, the US Senate passed leglislation including authorization for $25 billion in low-interest loans to automobile manufacturers for retooling older factories. The program passed as part of the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act of 2009 (H.R. 2638), also called the continuing resolution on the budget. The bill now goes to President Bush for his signature.
The retooling provision instructs the Department of Treasury to provide up to $25 billion in low-interest loans to American automakers to finance the retooling of existing manufacturing facilities. These facilities can then be utilized to produce the next generation of alternative fuel and advanced technology vehicles.
The retooling program was originally authored by Senator Debbie Stabenow (D-MI) in March of last year and authorized as part of the Energy Independence and Security Act of 2007 (EISA 2007). This provision was also included in Senator Stabenow’s Green Collar Jobs Initiative, which was included in the Congressional Budget Resolution in June 2008.
Division A (the Continuing Appropriations Resolution), Section 129 of H.R. 2638 appropriates $7,510,000,000 for fiscal year 2009 for the Department of Energy (DOE) Advanced Technology Vehicles Manufacturing Loan Program Account for the cost of the direct loans as authorized by section 136(d) of the EISA 2007, to remain available until expended. Of that amount, $10,000,000 is authorized for administrative expenses in carrying out the direct loan program. Commitments for the direct loans are not to exceed $25 billion in total loan principal.
Section 136 of EISA 2007 directs the program loans for automobile manufacturers and component suppliers to be applied to pay not more than 30% of the cost of retooling or expanding an existing facility to produce qualifying advanced technology vehicles or components; and of engineering integration performed in the United States of qualifying vehicles and qualifying components.
[Correction:The loan program does not intend to cap at 30% of the cost. 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 US Senate Energy & Natural Resources Committee (post).]
Under EISA 2007, an advanced technology vehicle is one that:
Meets US Tier 2 Bin 5 emissions or better;
Meets any new emissions standard for fine particulates; and
Offers combined fuel economy of at least 125% of the average base year combined fuel economy for vehicles with substantially similar attributes.
To be eligible to receive the loan, the recipient must recipient be financially viable without the receipt of additional Federal funding associated with the proposed project, among other criteria.
For an automobile manufacturer to be eligible for a loan during a particular year, the adjusted average fuel economy of the manufacturer for light duty vehicles produced by the manufacturer during the most recent year for which data are available must not be less than the average fuel economy for all light duty vehicles of the manufacturer for model year 2005.
In making loans to those manufacturers that have existing facilities, priority will be given to those facilities that are oldest or have been in existence for at least 20 years. Such facilities can currently be sitting idle.