Detroit Crashes the Conventions

In Denver and in St. Paul, U.S. automakers make a pointed case for congressional subsidies
The Big Three say they need $50 billion to help refurbish old plants Norm Betts/Bloomberg News

Detroit's Big Three are desperate for capital. So they've stormed the conventions in Denver and St. Paul-Minneapolis to get it.

The automakers have been trying to persuade Congress to speed up funding for $25 billion in subsidized loans to help retool their old plants. Given the industry's deteriorating state, they now say they need an extra $25 billion, all to be lent at low rates of 5% or so. Detroit's lobbyists want the funding approved before Congress adjourns on Sept. 30.

Teams flew in from Detroit and Washington, intent on using the conventions' myriad receptions, lunches, parties, and chance meetings to make the case for the loan program to as many members of Congress as possible. The automakers arrived with coordinated strategies and talking points. The United Auto Workers worked their contacts, too. "This issue is white hot," says Ziad S. Ojakli, group vice-president for government and community relations at Ford Motor. "We are focusing on it like a laser."

Why the rush? The loan program was first approved by Congress last December as part of the bill requiring automakers to get their fleets up to an average of 35 miles per gallon by 2020. The engineering and plant-retooling costs required to meet those standards will run to some $100 billion, according to Greg Martin, General Motors' Washington spokesman. Congress agreed to provide low-cost loans but hasn't approved the funds yet.

Ojakli says Detroit needs fast access to cheap capital or the industry's woes will deepen. He argues that it is just as critical to the U.S. to keep auto manufacturing alive as it is to support the country's financial system with aid to troubled banks. "This is not a bailout. We're looking to lower the cost of capital so we can meet the [fuel efficiency] mandate put on us and transform our industry faster," he says.

Of course, it has escaped no one's notice that Ohio and Michigan, two states hugely dependent on this sector, are critical swing states in the Presidential election. The automakers have far more leverage now than they will have after Nov. 5. "The road to the White House leads through the auto states," adds Bruce H. Andrews, Ford's vice-president for government relations. "When the candidates are on that road, we want to be holding up the billboards to let them know what's important."

Small Window

Already, Detroit's lobbyists have won the Presidential candidates over. Senator Barack Obama supports expanding the loans to total $50 billion. Rival Senator John McCain has voiced his support for the original $25 billion plan. But with some in Congress unconvinced that the auto industry merits help more than others do, the automakers are grabbing every opportunity to spread the word. An industry lobbyist ran into a senator on a Denver street, sat down for a quick coffee, and pitched the loansan unlikely event in Washington's more formal confines.

Auto execs still fear they'll run out of time before they can win enough support. Both Congress and the White House are sensitive to the risk that if they backstop the automakers after bailing out the financial sector, they could face more pleas as the weak economy takes its toll on other industries. Winning the funding "is going to be a challenge in this environment," says a longtime lobbyist closely watching the debate from outside the industry. That said, the automakers hold a trump card: Michigan and Ohio have 37 electoral votes.

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