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GM, Chrysler can’t tap into retooling loans

April 7, 2009

GM, Chrysler can’t tap into retooling loans

Law bars struggling automakers, for now

BY JUSTIN HYDE
FREE PRESS WASHINGTON STAFF

WASHINGTON — General Motors Corp. and Chrysler LLC are blocked — at least for now — from receiving any part of $25 billion in loans for retooling factories that federal officials will begin lending in a matter of weeks.

The U.S. Department of Energy has $25 billion in loans meant to boost production of fuel-efficient vehicles and parts for making them. So far, automakers and parts suppliers have submitted $44.6 billion in requests, including $10.3 billion from GM and $6 billion from Chrysler.

But under the laws governing the loan program, companies must be "financially viable" without the loans to receive them. The Obama administration ruled last week that neither GM nor Chrysler met that standard, giving GM 60 days to rework its restructuring plans and Chrysler 30 days to conclude a partnership with Fiat SpA or face bankruptcy.

That means Ford Motor Co. may be the only Detroit automaker that qualifies for the first round of loans, which Energy Secretary Steven Chu has said would be granted by May. Ford has asked for $11 billion.

Energy Department spokeswoman Stephanie Mutter said the department would not comment on individual applications. She did say Energy was working closely with Treasury on the loans, and that Treasury’s decisions on financial viability would stand.

GM spokesman Kerry Christopher said the automaker was working with Treasury and Energy Department officials on its restructuring plans. GM has already borrowed $13.4 billion from Treasury, and said last week that $2.6 billion of the loans requested from the Energy Department would go toward two variants of the Chevrolet Volt.

"They can’t give us the additional loans until all other issues are worked out," Christopher said.

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