FleetBuzz.com Worldwide Forums > IF RLI's are Bad how can this be OK?

Falcon

Sep 27 2008, 08:40 PM

QUOTE

The loan package for automakers would reward them with $25 billion in below-market loans, costing taxpayers $7.5 billion to subsidize the retooling of plants and development of technologies to help U.S. carmakers to build cleaner, more fuel efficient cars. Companies would not have to begin repaying the loans for five years

Source: AP

ihate2fly

Sep 28 2008, 04:12 PM

Not sure what an RLI is, but I guess the rhetorical question had to do with A v B at the WTO.

I guess I could simply say it is a $25 billion loan guarantee and not a grant or forgiveness of present or future debt. The car companies go out on the open market to secure loans. The collateral they put up for the loans, instead of their plants/HQ buildings/land, is a guarantee by the US government that they'll repay the loans should the auto companies default. It has to be repaid.

The money is also available to foreign car companies that have plants in the US and want to convert (re-tool) them to build hybrid/more fuel efficient vehicles.

dander

Sep 28 2008, 05:19 PM

QUOTE (ihate2fly @ Sep 28 2008, 11:12 AM)

Not sure what an RLI is, but I guess the rhetorical question had to do with A v B at the WTO.

I guess I could simply say it is a $25 billion loan guarantee and not a grant or forgiveness of present or future debt. The car companies go out on the open market to secure loans. The collateral they put up for the loans, instead of their plants/HQ buildings/land, is a guarantee by the US government that they'll repay the loans should the auto companies default. It has to be repaid.

The money is also available to foreign car companies that have plants in the US and want to convert (re-tool) them to build hybrid/more fuel efficient vehicles.

My guess is that in 5 or so years when the payments start the big 3 will whine and get some more gravy. If auto wasn't so unionized I wonder if the loan guarantee would have happened. IMHO I dislike all subsudies and loans provided by governments.

Falcon

Sep 28 2008, 09:08 PM

QUOTE (ihate2fly @ Sep 28 2008, 12:12 PM)

Not sure what an RLI is, but I guess the rhetorical question had to do with A v B at the WTO.

It is known under many different names, you may be more familiar with the mainly US "launch aid" description. Actual terms has varied over time and government involved but essentially is a loan that is paid back as products are sold. Here is a link to UK's Department for Business Enterprise & Regulatory Reform description.

QUOTE (ihate2fly @ Sep 28 2008, 12:12 PM)

I guess I could simply say it is a $25 billion loan guarantee and not a grant or forgiveness of present or future debt. The car companies go out on the open market to secure loans. The collateral they put up for the loans, instead of their plants/HQ buildings/land, is a guarantee by the US government that they'll repay the loans should the auto companies default. It has to be repaid.

Are you sure about this? I have not seen anything about guarantees for open market loans. On the contrary below market terms and the government making 7.5 BUSD available indicate differently.

QUOTE (ihate2fly @ Sep 28 2008, 12:12 PM)

The money is also available to foreign car companies that have plants in the US and want to convert (re-tool) them to build hybrid/more fuel efficient vehicles.

Again, how do you know they are since the terms are not finalized? However, if this is the test a subsidy must pass then I guess RLI's are OK as Bombardier has been approved for 155 MGBP in the same manner you described.