Big 3 scores in lobbying for bailout

OK’d plan includes $1B tax credit over 10 years for plug-ins and fully electric vehicles.

David Shepardson / Detroit News Washington Bureau

WASHINGTON — Detroit’s Big Three CEOs personally spoke with undecided members of Congress to help win passage of the $700 billion Wall Street bailout package — and their work paid off.

The bill, signed into law Friday by President Bush, includes a $1 billion tax credit over 10 years for plug-in vehicles and fully electric vehicles, which will be a boost for electric cars being planned for production by General Motors Corp. and Chrysler LLC.

GM Chairman and CEO Rick Wagoner spoke Friday with Rep. Joe Knollenberg, R-Bloomfield Township, who had voted against the bailout on Monday. Knollenberg also spoke with Chrysler LLC Chairman and CEO Robert Nardelli, Ford Motor Co. CEO Alan Mulally, and ArvinMeritor Chairman and CEO Chip McClure.

Nardelli spoke to many members of Congress, including most of the nine Michigan members who opposed the rescue package. Chrysler also urged its employees to back the plan, giving them an 800 number to call their member of Congress.

"The message from the auto executives was something needed to be done or we were going to see layoffs in the coming weeks," said Nate Bailey, a spokesman for Knollenberg. "They were legitimately pretty scared."

Passage of the bailout bill should alleviate some of those fears, but even more promising for the auto industry is the tax break for electric vehicles. Consumers could get a tax credit worth up to $7,500 for vehicles such as the Chevrolet Volt, or Chrysler vehicles planned for production in 2010. Nissan Motor Co. also says it will have an electric vehicle available in 2010. Those cars could cost as much as $40,000.

A vehicle with at least a 4-kilowatt battery pack would qualify it for a $4,168 tax credit.

The rescue package also includes an extension of a tax credit for research and development..

GM spokesman Greg Martin praised the vote, saying the Detroit automaker "is thankful for Congress taking action. It could not have come at a more critical time to stabilize the financial markets and to get our economy functioning again."

Martin said GM officials knew voting for the bailout package wasn’t easy for some members of Congress.

"We know this was a difficult vote for many Michigan members, but in particular, Representative Knollenberg showed some strong leadership and support for the auto industry with his approval of this bill," Martin said.

Michigan members had been working hard to convince the U.S. Treasury Department to buy up troubled auto loans as part of the bailout. Auto financing companies have faced troubles in recent months.

While the department made no promises, Knollenberg got a letter Friday from the Treasury Department. It confirmed that "automobile loans can be purchased in circumstances where the secretary and chairman of the Federal Reserve conclude that doing so would be necessary to promote financial market stability," wrote Kevin Fromer, assistant secretary for legislative affairs at the Treasury Department, in a letter obtained by The Detroit News.

Nearly 4 in 10 auto buyers have been unable to get financing for new vehicles, because of tougher requirements from lenders.

A survey released this week said 64 percent of new car buyers had been approved for loans through Sept. 20 this year, down from 83 percent during the same period last year.

Auto sales fell sharply in September, in part because of the new difficulties in obtaining credit. Banks have also sharply cut back on automotive leasing, in part because of the declining residual values of larger vehicles. Lease payments are based on residual values, which is what vehicles are expected to be worth when they are returned at the end of the lease. Ford Motor Credit took a $2.1 billion writedown on the reduced value of leased vehicles in its portfolio in the second-quarter.