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Loans won’t make cars go faster

Sarah Gardner Oct 1, 2008
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Loans won’t make cars go faster

Sarah Gardner Oct 1, 2008
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TEXT OF STORY

Scott Jagow: President Bush is set to sign a bill authorizing $25 billion in loans to American automakers. The loans are aimed at helping Detroit make more fuel-efficient cars. But as Sarah Gardner reports from the Marketplace Sustainability Desk, don’t expect a sudden flurry of zero-emission cars.


Sarah Gardner: U.S. automakers face falling revenues and mountains of debt. Business professor Peter Morici says these loans simply help the Big Three pay down some debt and make the smaller, more fuel-efficient cars they’ve already planned, like GM’s all-electric Chevy Volt.

Peter Morici: They don’t have time to develop new prototypes, that would take four to five years. To get something on the shelf they have to rely on what they have, and they’re already moving forward.

But government red tape could delay these loans for months. Auto analyst David Healy at Burnham Securities says the industry can afford to wait — a bit.

David Healy: Even GM in a tough market can get through ’09, so they don’t need the money this morning.

Critics of the Chrysler bailout in 1979 complain it enabled “business as usual.” But auto expert David Cole says it’s too late for American automakers to renege on cleaner cars. New fuel economy standards are looming beginning in the 2011 model year.

I’m Sarah Gardner for Marketplace.

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