General Motors Corp., Ford Motor Co. and their suppliers may get $25 billion in government loans to speed development of fuel-efficient vehicles this year and have to wait until next year for another $25 billion, analysts said.
The auto companies probably will be able to win support for $3.75 billion that must be appropriated to cover the costs of issuing the first $25 billion, Clint Currie, a Washington-based transportation analyst at Stanford Group, said in a report today. The odds against funding additional loans for the industry this year are 3-to-1, he said.
"We expect the attention needle on providing direct loans to Detroit to remain in the red zone for the next several weeks as executives from Ford, GM and Chrysler visit Washington," said Currie, whose company advises investors on the likely outcome of federal policy. The companies may get the rest of what they seek in 2009, he said.
The U.S.-based automakers and their suppliers say they need the funding to help react to buyers' rapid switch to more fuel-efficient cars from trucks after gasoline topped $4 a gallon earlier this year. GM and Ford get a majority of their U.S. sales from light trucks, and lost a combined $24.1 billion in the second quarter as industry sales of the pickups, sport-utility vehicles and vans fell 18 percent through June.
Funding for the loans may be included in the 2008 energy bill, in a second economic stimulus package or in legislation that would temporarily fund the government until Congress completes its budget work, House Speaker Nancy Pelosi, a California Democrat, told reporters.
Funding the first $25 billion would "materially curtail" the bankruptcy risk at the U.S. automakers, JPMorgan & Chase Co. analyst Himanshu Patel wrote in a report released today. About 75 percent of the funds would go to GM, Ford and Chrysler LLC, adding $6 billion to liquidity for each over the next 1 to 3 years, the New York-based analyst said.
GM, with more emphasis on electric vehicles, may end up getting more of the funding, and the government loans would be in the same range as the $5 billion to $10 billion analysts estimate the Detroit-based company needs in additional liquidity during the U.S. decline, Patel said. He rates GM shares "overweight."
GM spent $7.5 billion on capital projects and $8.1 billion on research and development last year.
The current structure of the loan program also would help automakers because any improvement in liquidity is allowed to be passed on to equity holders if the shares rise, Patel said.
The most likely place for automakers to get the funding they seek this year is the so-called continuing resolution, which is a law that lets the government keep operating when the current budget expires at the end of September, Patel said.
The auto companies probably will be able to win support for $3.75 billion that must be appropriated to cover the costs of issuing the first $25 billion, Clint Currie, a Washington-based transportation analyst at Stanford Group, said in a report today. The odds against funding additional loans for the industry this year are 3-to-1, he said.
"We expect the attention needle on providing direct loans to Detroit to remain in the red zone for the next several weeks as executives from Ford, GM and Chrysler visit Washington," said Currie, whose company advises investors on the likely outcome of federal policy. The companies may get the rest of what they seek in 2009, he said.
The U.S.-based automakers and their suppliers say they need the funding to help react to buyers' rapid switch to more fuel-efficient cars from trucks after gasoline topped $4 a gallon earlier this year. GM and Ford get a majority of their U.S. sales from light trucks, and lost a combined $24.1 billion in the second quarter as industry sales of the pickups, sport-utility vehicles and vans fell 18 percent through June.
Funding for the loans may be included in the 2008 energy bill, in a second economic stimulus package or in legislation that would temporarily fund the government until Congress completes its budget work, House Speaker Nancy Pelosi, a California Democrat, told reporters.
Funding the first $25 billion would "materially curtail" the bankruptcy risk at the U.S. automakers, JPMorgan & Chase Co. analyst Himanshu Patel wrote in a report released today. About 75 percent of the funds would go to GM, Ford and Chrysler LLC, adding $6 billion to liquidity for each over the next 1 to 3 years, the New York-based analyst said.
GM, with more emphasis on electric vehicles, may end up getting more of the funding, and the government loans would be in the same range as the $5 billion to $10 billion analysts estimate the Detroit-based company needs in additional liquidity during the U.S. decline, Patel said. He rates GM shares "overweight."
GM spent $7.5 billion on capital projects and $8.1 billion on research and development last year.
The current structure of the loan program also would help automakers because any improvement in liquidity is allowed to be passed on to equity holders if the shares rise, Patel said.
The most likely place for automakers to get the funding they seek this year is the so-called continuing resolution, which is a law that lets the government keep operating when the current budget expires at the end of September, Patel said.
I think that it is very important to loan the money to Auto mobile industires, especially in the world of today. The increase of the fuel prices is outrages and We must do what it takes in order to keep our world green.
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