Automakers scale back loan plans to $25B promised them

DETROIT -- U.S. automakers have decided to back down from the drive to get $50 billion in loan guarantees from the federal government and are focused on persuading Washington to appropriate the money needed to back the $25 billion in loans promised in last year's energy bill.

Government backing would let the companies back into the credit markets, from which they are now essentially shut out, and allow them to save substantial money through lower interest rates on loans.

The change in strategy came over the weekend after the government let Lehman Bros. file for bankruptcy protection rather than provide financial backing that could have helped the bank to find a buyer.

The automakers' push for the appropriation has new urgency after the weekend banking meltdown. The car companies already were working in a tight window, trying to get the money appropriated and settling on rules for which kinds of projects would qualify for the guarantees before Congress recesses for the campaign season. Now, with Treasury Secretary Henry Paulson indicating that the government's desire to save ailing companies is wearing out, the automakers feel even more pressure to get the deal done.

General Motors CEO Rick Wagoner Tuesday wrapped up his speech at GM's 100th anniversary celebration and shortly after boarded a plane for Washington to join top executives including Ford Chairman Bill Ford to lobby for the loan appropriation.

Already in March, the feds guaranteed $30 billion in potential losses when JP Morgan Chase agreed to buy ailing Bear Stearns. And earlier this month, the government took over mortgage lenders Fannie Mae and Freddie Mac.

Paulson said Monday that he isn't ruling out future intervention, but the automakers are careful to say the loans are not another bailout. The $25 billion in guarantees was promised as part of the energy bill signed last year, which raised fuel efficiency standards to 35 miles per gallon on average starting in 2020. The financing is intended to help automakers and suppliers convert aging plants to produce more fuel-efficient cars or fuel efficiency technologies, such as hybrid batteries.