Automakers downshift on loan requests

DETROIT -- U.S. automakers have decided to back off from their drive for $50 billion in loan subsidies from the federal government and now are focused on persuading Washington to appropriate the money to back the original $25 billion promised in last year's energy bill.

The strategy change came over the weekend after the government let Lehman Bros. file for bankruptcy protection rather than providing financing to help the investment bank 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 settle on rules for what projects would qualify before Congress recesses for the campaign season.

Now, with Treasury Secretary Henry Paulson indicating the government's will to save ailing companies has limits, automakers feel even more pressure to get the deal done.

Already in March, the feds guaranteed $30 billion in potential losses when JPMorgan agreed to buy ailing Bear Stearns. Earlier this month, the government took over mortgage giants 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 was promised in the energy bill signed into law last year that raised fuel-efficiency standards to 35 miles per gallon on average by 2020. The financing was aimed at helping automakers and suppliers convert aging plants to produce more fuel-efficient cars and fuel-efficiency technologies, such as hybrid batteries.

"The industry signed up for a massive increase in fuel-economy performance, recognizing it would take some breakthrough technologies and big investments," Wagoner said after the centennial celebration. "As a part of that, a relatively small fraction of the investment the industry will have to make to achieve these improvements was to be provided for by direct loans. We're just asking that these loans now be funded."