Detroit is Campaigning, Too

[cashlenders]

The Big Three descended on the conventions to press for congressional subsidies

by Jane Sasseen

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

The automakers have been trying to convince 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 want an extra $25 billion, all to be lent at low rates of 5% or so. Detroit's lobbyists want the funds approved before Congress adjourns on September 30.

So the teams flying in from Detroit and D.C. hit the conventions with a mission: to use the 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 (FM). "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, says Greg Martin, the Washington DC based spokesman for General Motors (GM). 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 was to support the country's financial system with loans to troubled investment 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 November 5th. "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."
just a cup of coffee

Already, Detroit has won over the Presidential candidates, both of whom have met with the Big Three CEOs. Obama backed the loan program first, and supports expanding it to $50 billion. McCain initially opposed it, but in late August, threw his support behind the % billion tranche. But with some in Congress unconvinced that the auto industry merits help more than others do, the automakers are taking every opportunity to get their views across. An industry lobbyist ran into a senator on a Denver street, sat down for a quick coffee, and made the pitch for the loans—something unlikely to occur in Washington's more formal confines.

Auto execs fear they'll run out of time to win enough support for the funding from Congress by the end of September. 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 calls for help as the weak economy take 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 that few other sectors can play: Between them, Michigan and Ohio account for 37 electoral votes.

source: businessweek