Barack Obama’s presidential campaign said Friday that the federal government should act swiftly to help unlock credit for the financing of car loans crucial to U.S. automakers. The lack of access to consumer car loans was hurting the industries and threaten the nation’s manufacturing sectors, Michigan’s congressional delegation said this week.
The Democrat supports call by Michigan lawmakers for the Treasury Department and the Federal Reserve to use their authority in the seven hundred billion dollars bailout plan to help the industry deal with the tight credit markets said Jason Furman Obama’s economic adviser. Auto finance companies and banks tightened credit standards for they can’t borrow money to lend or they been reluctant to lend and risk defaults.
Obama called the administration to speed up the availability of $25 billion in low-interest loans approved by Congress last month. The funding would help auto manufacturers and suppliers retool their plants and build fuel-efficient vehicles.
Obama’s economic adviser Jason Furman said “He doesn’t want to take any options off the table to help the industry through this financial crisis.” Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke could take several steps under the bailout provisions, said the Michigan lawmakers. They also said the companies were considering asking the Fed for access to a program that provides low-cost credit.

The Detroit’s big automakers have been trying to persuade Congress to speed up funding for $25 billion in subsidized loans to help retool their old plants. Before the Congress adjourns on September 30, the Detroit’s lobbyist wants the funding approved. The industry’s deteriorating state; they say they need an extra $25 billion and all to be lent at low rates of 5%.

The team flew in from Detroit and Washington and intent on using the conventions myriad reception, lunches, parties, and meetings to make the case for the loan program to as many members of Congress. Ziad S. Ojakli group vice-president for government and community relation at Ford Motor says “This issue is white hot” and “We are focusing on it like a laser.”

According to Greg Martin the General Motors’ Washington spokesman, the engineering and plant-retooling costs required to meet those standards will run to some $100 billion. Congress agreed to provide low-cost loans but has not approved the funds. Detroit needs fast access to cheap capital or the industry’s woes will deepen said Ojakli. He argues that it is critical to the U.S. to keep auto manufacturing alive as it is to support the country’s financial system with aid to troubled banks.

Rick Wagoner chairman of General Motors Corp. will make the case for up to $50 billion in federal loans to the auto industry at a U.S. Senate energy summit. The summit will be on September 12 and was pushed by a bipartisan group of senators hoping to break a logjam around energy in Congress. The Democrats and Republican Party have hammered each other over who’s to blame for rising energy prices and what should be done to relieve them.

Group of senators unveiled an energy bill in July that included $7.5 billion in loans for automakers and parts suppliers to retool. Six other senators have signed on as supporters and Senate leaders approved the idea of an energy summit.

The maker of automotive parts and building climate-control system, Johnson Controls Inc. said it will pare production and cut an unspecified number of jobs and resulting in costs of as much as $500 million. Johnson Control Inc. also said it expects to complete most of the cost-reduction effort by early 2010.

The Chrysler LLC has been demonstrating plug-in hybrid prototypes to some dealers that are further developed than those previously shown by the automaker. The vehicles are being developed by Chrysler’s Envi unit and which the automaker created last year to create electric vehicles and other advanced propulsion technologies, said Chrysler Vice Chairman and President Jim Press.

The Big Three Detroit carmakers reported hefty double digit declines from a year ago and Japan’s Toyota and Honda saw single digit losses while Nissan bucked the trend with an increase in sales. Automakers saw another painful slide in US sales this August with the consumers cautious amid a weak economy. According to research firm Autodata, the total new car sales amounted to 1.249 million units, or an adjusted annual pace 13.72 million down a whopping 15.5 percent from a year ago.

According to industry source Detroit auto companies are preparing to launch a campaign for assistance next week and the goal is to have Congress approve at least 25 billion dollars in loans by the end of September. Peter Morici economist at the University of Maryland said “It is a bad time for the industry, even for those companies that are competitive.” “I don’t expect thing to improve much because the economic conditions are slowing further people don’t have any money for big purchases.”

GM’s sales were notably better than the consensus forecast for a 29 percent drop, and were arguably aided by the employee discount program said Himanshu Patel at JP Morgan Securities . Reported August that General Motors US sales slumped 20.4 percent from a year ago to 308,817 vehicles and although it pointed out that sales were up a significant 31 percent from a month earlier.

August US sales slid 26.6 percent from a year ago, citing a weak economy and sluggish demand for large trucks and sport utility vehicles said Ford Motor Co. and Ford also cited higher demand for fuel efficient small cars and SUVs but this was offset by other factors. The company said “the impact of a weak economy and lower demand for larger trucks and SUV’s resulted in double digit sales declines for Ford and the auto industry.”

The Bangko Sentral ng Pilipinas (BSP) said, credit card receivables as well as auto loans dipped in March in line with weaker consumer spending due to higher prices of oil and other commodities. BSP said in a statement, bank’s card receivables slipped 0.6 percent to P115.4 billion in March this year from the end December level. Receivables went up by 19.7 percent compared with P96.430 billion in March last year.

Universal and commercial banks accounted for 81.1 percent or P93.6 billion of the total receivables and while credit card subsidiaries held 14.8 percent or P17.1 billion. Of the total receivable, the current amount reached P103.660 billion while past dues amounted to P11.757 billion. Non-linked thrift banks carried the remaining P4.7 billion on their balance sheets.

Banks’ loan portfolio amounted to P2.137 trillion in March and higher than the P2.130 trillion at end December and the P1.925 trillion in March last year. Price pressures increased in the first quarter and with inflation rising to 5.6 percent from 3.3 percent in the previous quarter. Credit card receivables comprised 5.4 percent of lenders’ total portfolio, higher than the 5 percent in March last year.

The substantial decline in auto loans stemmed from the change in financial reporting of auto loans under the new Financial Reporting Package said BSP. Thrift banks took the biggest slice of the auto loan market at 61 percent while universal and commercial banks held 37.3 percent.

Barack Obama will renew his sales pitch to voters for the 2009 model Obama administration and Detroit automakers are among those, in his fourth visit to Michigan. Obama used Detroit’s foibles as a rallying cry for reform during the Democratic primary, making his critique a standard part of his stump speech. Obama has launched a charm crusade toward the industry that powers a key swing state, since clinching the nomination.

Obama’s visited assembly plants, meet with chief executives of General Motors and Ford and talked up the companies’ new technology. Obama was ready when automakers and suppliers began seeking funding for up to $50 billion in government loans in July. Michigan’s Democratic lawmakers, including Rep. John Dingell meet with Obama to give him their advice and while the UAW threw its support behind Obama touting his record on trade and health care.

Obama had proposed a similar program last year as part of his fuel economy program and sided with automakers while McCain rejected the idea. The idea appeals to Michigan voters and helps Obama to a 46% to 39% lead in the Detroit Free Press/Local 4 Michigan Poll conducted last month. The campaign touts the loans in a Michigan specific TV ad, following Obama’s pledge Thursday to “help our auto companies retool so that the fuel-efficient cars of the future are built right here in America.” The automakers’ three top executives General Motors Chairman Richard Wagoner, Ford Chief Executive Alan Mulally and Chrysler Chairman Bob Nardelli have not contributed to the election.

Automakers were “deserving” of as much as $50 billion in government-backed loans so that they can build more fuel-efficient cars, said a top General Motors executive. Robert A Lutz vice-chairman of General Motors said the car companies need money to retool their plants but probably cannot raise enough capital on their own because of the tight credit markets. Lutz also said the automakers have already made considerable progress in transforming themselves and that the government should help them proceed faster.

Lutz told reporters at an event near Chicago where General Motor showed off it 2009 line up that “The American auto industry is deserving of government loan guarantee,” “We have done a whole bunch of things that people said, ‘Why aren’t you doing this?’” Automakers and along with the United Automobile Workers union and lawmakers are urging Congress to appropriate $3.75 billion to back the $25 billion in loans authorized last year.

Detroit carmakers have announced plans to revamp numerous truck plants so that they can build the smaller cars and crossover vehicles. Costs of each conversion are ranging from $75 million at a Ford plant. Sales of pickups and SUVs plummeted this year as gasoline prices climbed above $4 a gallon in much of the United States. Automakers have been offering substantial discount on some models and shutting down plants that make them to keep inventories from growing larger. July, large SUV sales were down to 42% and full size pickup trucks sales declined to 28%.

This I found in the web that may interest you and give you information about automakers.

WASHINGTON (AP) — Automakers plan to urge Congress to support funding up to $50 billion in low-interest loans over three years to help them modernize their assembly plants and develop next-generation fuel-efficient vehicles.

Industry officials said the loans, which are twice the amount authorized in last year’s energy bill, are a top priority when Congress returns next month because of the declining fortunes of Detroit’s automakers and tightening credit markets.

“The amount of concern and urgency from the Detroit companies has increased in the last month and significantly ratcheted up what they’re communicating what their funding needs are,” said Alan Reuther, legislative director for the United Auto Workers union.

Congress authorized $25 billion in low-interest loans in last year’s energy bill, but the auto industry’s allies in Congress have been unable to get funding for the plan.
The loans would provide low-interest credit for up to 30 percent of the cost of retooling facilities to build hybrids, plug-in hybrids, electric cars and other alternatives.

Detroit’s automakers have struggled this year amid a sluggish economy and consumers shunning large sport utility vehicles and trucks because of high fuel prices. General Motors Corp. reported a second-quarter loss of $15.5 billion and Ford Motor Co. reported an $8.7 billion loss.

The auto industry’s future has been a top issue in Midwest battleground states key to the presidential race. Sen. John McCain had opposed the retooling efforts, arguing that his $5,000 tax credits for consumers who buy fuel-efficient vehicles and a $300 million battery prize would accomplish the same goal.
But in a statement released Friday, the Arizona Republican said Congress should fund the loan program in the energy bill: “I believe we should fund it and take action that will assist Detroit and its suppliers in making it through this difficult time of transition.”

When applying for an auto loan, most buyers grapple with some question of whether they should opt for a fixed or floating rate option. The question assumes importance as car loans have a lower tenure than home loans, home loans have a 15 – 20 year tenures, during the borrower will go through a few rate cycles.

Car loans are for three to four years and maximum tenure: 7 years and that on an average. It means that a person mostly would find it difficult to gauge that whether they are entering a rising or a falling cycle. Many public sector banks, including State Bank of India, Bank of India and Bank of Baroda have started offering floating rates on auto loans. ICICI Bank was offering both floating and fixed options way bank in September 2007 and is planning to offer only floating rate loans in August 25. Private sector lenders are beginning to offer floating rate loans.

“Earlier, we were planning to increase over fixed and floating rates by 50 basis points each. However, now we feel that the interest rate cycle has almost peaked. For the customer, it will make a lot of sense to get into floating rate auto loans,” said N R Narayan, head of vehicle loan in ICICI Bank. He also said that the interest rates would move southwards after that.

Director of Acorn Wealth Govind Pathak said “Six months ago, the answer would have been definitely fixed because of the uncertainty in the interest rate scenario. Now, floating rate looks like a better option.” Though this is the immediate solution as far as the choosing the interest rate goes, auto buyers in the future will have to carefully gauge the scenario before taking a call on the right option.

The financial aid office at the University of Maryland is busy before classes begin. So many students returning to campus are counting on financial aid to pay for tuition, books and supplies. College students feel the effect of the credit crunch as some private companies stop issuing student loans and others raise interest rates. Abhas Mathur student said “I think in today’s day and age, student loans are very important, there aren’t too many jobs out here that cover a full student’s expense for a college education, so student loans bridge the gap.”

Each year Paul Hassler consolidates the outstanding student loans to make one interest payment, but this year, he was told he couldn’t consolidate, and the new loan carried a higher interest rate. Paul Hassler is putting his youngest daughter through college. Paul Hassler also said “the cost of the loans was running me about $550 a month, but by not being able to consolidate would have move the cost of the loan up to almost $1,100 to $1,200 for our budget, it really just would have blown things out of kilter with us.”

Financial Aid Director Sarah Bauder the University of Maryland said the rules have changed and she also said that consolidation is no longer an attractive option, and she does not recommend it anymore. Hassler rolled the student loans from private lenders into direct loans funded by the federal governemtn rather than deal with $1,200 monthly payment.