Why G.M. needs a government loan
A healthy auto industry is critical to the economy.
When General Motors celebrated its 100th anniversary this month, it was a time to recall not only our achievements but also the challenges we overcame in our first century. We endured economic upheavals such as the Great Depression and produced vehicles to defend America in war and drive our economy in peace.
Today we are facing an array of challenges that are alarming, not only for our industry, but for our nation as well. Fuel prices have risen precipitously at the same time as the US economy has slowed. Financial markets are volatile. We are ever more dependent on unstable or hostile regions to supply our oil. Concerns are rising about the potential impact of climate change.
The challenges we face today demand nothing less than the reinvention of the automobile. And General Motors and the rest of the US auto industry are striving to achieve that goal. At GM, we have made a significant commitment to produce alternate-propulsion vehicles. We have six hybrid models on the market today and will have nine by mid-2009. The Chevy Volt, an electric vehicle that will go on sale in late 2010, will deliver 40 miles of gasoline- and emission-free driving on a single charge and hundreds more miles by using a small gas engine to generate additional electricity.
But uncertain economic and market conditions threaten the progress that we are making and that American consumers are demanding we accelerate. That acceleration – which requires significant investment – is at risk because of limited access to capital.
Last year, Congress recognized that our industry needed to do its part to lead the nation away from its dependence on foreign oil when it passed the energy bill. And the auto industry has recognized the need to speed the development of advanced technologies to make that a reality.
Our industry must spend more than $100 billion during the next several years to develop and engineer vehicles to meet stringent new government fuel-economy standards as well as satisfy the needs of American workers and their families for cleaner, more fuel-efficient vehicles. That amount is vastly greater than the $12 billion domestic automakers typically spend annually on research and development.
To meet the goals of the energy bill, lawmakers recognized that our industry would need access to capital, so they added a provision called the Advanced Technology Vehicles Manufacturing Incentive Program. This measure can help provide access to capital by authorizing up to $25 billion in direct federal low-interest loans to automakers and auto parts suppliers to speed the development of advanced technology vehicles, such as hybrids, hydrogen fuel-cell vehicles, and electric cars such as the Volt. This capital is necessary to continue our transformational plans at full speed and give us the best chance of success.
The capital raised through these loans can be spent on such efforts as increasing our nation's R&D in advanced batteries and alternative fuels, and retooling our factories to build new vehicles that use these advanced technologies.
To make the loans available, Congress still must appropriate funds for this already approved measure, and the Department of Energy must produce rules on how to qualify for the loans. We urge Congress and the administration to quickly take those steps.
Make no mistake, the domestic auto industry is critically important to the health of the economy. Our industry employs a quarter of a million workers and provides healthcare benefits to 2 million Americans and pension benefits to nearly 800,000 retirees and spouses. Partsmakers employ thousands more. Domestic automakers have invested a quarter of a trillion dollars in the US economy over the past two decades, investments that impact virtually every economic sector. For example, automakers are the largest purchasers of raw materials and computer chips in the United States.
Let's be clear: This is not a bailout or a subsidy. It's a loan, which we'll pay back, with interest. This program will help preserve US competitiveness in a global economy in which every automaker – including some with the direct aid of their own governments – is striving to take the lead in advanced propulsion technologies. For all these reasons, this direct loan program is an effective and appropriate US public policy.
Nearly a century ago, GM introduced the automobile self-starter, a technological breakthrough that banished the hand-crank forever. As the Volt demonstrates, GM is still at the forefront of advancing automotive technology. Government action now to implement this loan program can help assure that the US maintains its position as the global innovation leader and can help speed cleaner, more fuel-efficient cars and trucks to consumers' driveways.
• Troy Clarke is president of General Motors North America.