GM and Chrysler to Receive More Bailout Funds

The "Big Three" CEO's at Last Fall's Congressional Hearings







General Motors Corp. could get as much as $5 billion more in federal loans, while Chrysler LLC could get $500 million as they race against government-imposed deadlines to restructure, according to a government report filed Tuesday.

The quarterly report by a special inspector general on the auto industry and bank bailout programs says the money will be made available for working capital. GM has until June 1 to complete restructuring plans that satisfy the government's auto task force, while Chrysler has until April 30.

A person briefed on the plans said Tuesday that the exact amount of the loans have not been finalized and will be worked out with the companies. The person asked not to be identified because the negotiations are confidential.

GM already has received $13.4 billion in government loans, while Chrysler has received $4 billion.

The government's auto task force rejected both companies' restructuring plans on March 30 and gave Chrysler until the end of April to make further cuts and take on a partner or face liquidation. If GM doesn't meet its deadline, it will be forced to restructure under bankruptcy protection.

GM CEO Fritz Henderson said last week that the automaker would need $4.6 billion during the second quarter. A Chrysler spokeswoman said only that the company has not received any more money beyond the initial $4 billion.

The inspector general's report filed Tuesday says that as of March 31, the Treasury Department had spent $24.8 billion for the Auto Industry Financing Program, out of a projected initial total of $25 billion. The money includes aid to Chrysler and GM, plus their financial arms, Chrysler Financial and GMAC Financial Services.

The Treasury also has estimated that it will spend up to $1.25 billion to guarantee warranties for people who buy Chrysler or GM vehicles during the restructuring period. The program is designed to reassure consumers that their warranties will be honored, according to the report, which was prepared for Congress.

Source: Yahoo News

President Obama Spells Out Rules for the Future of GM and Chrysler

President Obama at News Conference with Timothy Geithner




President Barack Obama said Monday that neither General Motors nor Chrysler has proposed sweeping enough changes to justify further large federal bailouts, and demanded "painful concessions" from creditors, unions and others as their price for survival.

Obama also raised the possibility of a controlled bankruptcy to help either or both "restructure quickly and emerge stronger" — uttering the term that industry and union officials have warned repeatedly could lead to the collapse of an entire domestic industry.

With his words, Obama underscored the extent to which the government is now dictating terms to two of the country's iconic corporations — forcing the departure of Rick Wagoner as CEO of General Motors, and bluntly warning it may pull the plug on either or both companies.

The Bush administration late last year approved $17 billion in federal funds to help GM and Chrysler survive. It also demanded both companies submit restructuring plans that the Obama administration would review.

Even as he pronounced their effort unsatisfactory, the president said the administration will offer General Motors "adequate working capital" over the next 60 days to produce a reorganization plan acceptable to the administration.

He said Chrysler's situation is more perilous, and the government will give the company 30 days to overcome hurdles to a merger with Fiat, the Italian automaker. If they are successful "we will consider lending up to $6 billion to help their plan succeed," he said.

Obama spoke at the White House with the Big 3 standing at yet another crossroads. As the president noted, the industry has shed over 400,000 jobs in the past year as the recession took hold. Officials announced last week bailout funds would be made available to companies that supply the automakers, an attempt to keep them afloat.

Obama said he is committed to the survival of an auto industry — on terms that will allow it to compete internationally.

"But we also cannot continue to excuse poor decisions," he said. "And we cannot make the survival of our auto industry dependent on an unending flow of tax dollars."

He also said some of the industry's progress has scarcely been noticed. He mentioned that the North American car of the year in 2008 was produced by GM.

"Let me be clear: the United States government has no interest or intention of running GM," he said.

But that was at the same time he was formally announcing the departure of Wagoner, whom administration officials forced into retirement on Sunday in preparation for the president's remarks.

"This is not meant as a criticism of Mr. Wagoner, who has devoted his life to this company; rather it's a recognition that it will take a new vision and new direction to create the GM of the future."

Other changes at GM include new directors on its board. Fritz Henderson, GM's president and chief operating officer, became the new CEO. Board member Kent Kresa, the former chairman and CEO of defense contractor Northrop Grumman Corp., was named interim chairman of the GM board.

"The board has recognized for some time that the company's restructuring will likely cause a significant change in the stockholders of the company and create the need for new directors with additional skills and experience," Kresa said in a written statement.

The Obama move comes amid public outrage over bonuses paid to business leaders and American International Group executives — set against a severely ailing economy.

GM failed to make good on promises made in exchange for $13.4 billion in government loans. Chrysler, meanwhile, has survived on $4 billion in federal aid during this economic downturn and the worst decline in auto sales in 27 years. In progress reports filed with the government in February, GM asked for $16.6 billion more and Chrysler wanted $5 billion more.

GM owes roughly $28 billion to bondholders. Chrysler owes about $7 billion in first- and second-term debt, mainly to banks. GM owes about $20 billion to its retiree health care trust, while Chrysler owes $10.6 billion.

GM and Chrysler employ about 140,000 workers in the U.S. In February, GM said it intended to cut 47,000 jobs around the globe, or almost 20 percent of its work force, close hundreds of dealerships and focus on four core brands — Chevrolet, Cadillac, GMC and Buick.

Source: Yahoo News

Auditors for General Motors Raise Substantial Doubt as to Automaker's Viability

The company's annual report was issued Thursday citing "substantial doubt" that it could sustain operations. GM did announce earlier that it was expecting this report, which was an attempt to soften the blow. As we know, GM is basically on life support, depending on massive government loans with no real relief in sight. In fact, they are asking for an ADDITIONAL $30 billion to keep afloat over the short term.

As much as we all love GM and want the company to survive, something more drastic than continued subsidies is needed.

From Yahoo News:

General Motors Corp.'s auditors have raised "substantial doubt" about the troubled automaker's ability to continue operations.

The company revealed the concerns, raised by the accounting firm Deloitte & Touche LLP, in its annual report filed on Thursday.

GM has received $13.4 billion in federal loans as it tries to survive the worst auto sales climate in 27 years. It is seeking a total of $30 billion from the government. During the past three years it has piled up $82 billion in losses, including $30.9 billion in 2008.

GM says in its report that its auditors cited recurring losses from operations, stockholders' deficit and an inability to generate enough cash to meet its obligations in raising substantial doubts about its ability to continue as a going concern.

The company said in its filing that its future depends on successfully executing the viability plan submitted to the government in February to justify the loans.

"If we fail to do so for any reason, we would not be able to continue as a going concern and could potentially be forced to seek relief through a filing under the U.S. Bankruptcy Code," GM said in the annual report, filed with the U.S. Securities and Exchange Commission.

GM, the report said, is highly dependent on auto sales volume, which dropped rapidly last year.

"There is no assurance that the global automobile market will recover or that it will not suffer a significant further downturn," the company wrote.

GM warned last month that its auditors may raise the doubts, and industry analysts said auditors' statements may trigger clauses in some of GM's loans, placing them in default.

But the company said in its filing that it has received waivers of the clauses for its $4.5 billion secured revolving credit facility, a $1.5 billion U.S. term loan and a $125 million secured credit facility.

"Consequently, we are not in default of our covenants," the report said. "If we conclude that there is substantial doubt about our ability to continue as a going concern for the year ending Dec. 31, 2009, we will have to seek similar amendments or waivers at that time."

GM Posts a Staggering Loss of $9.6 Billion in the 4th Quarter of 2008.

GM World Headquarters





General Motors burned through $6.2 billion in cash during the fourth quarter in posting this massive loss and is even now in talks with the Obama administration requesting more money.

The nation's biggest domestic automaker lost $30.9 billion for all of 2008 as it struggled against a U.S. sales slump and a global recession.

For the fourth quarter, GM says it lost $15.71 per share, compared with a loss of $722 million, or $1.28 per share, in the year-ago period.

Excluding special items, The Detroit company's loss was $9.65 per share. On that basis, analysts surveyed by Thomson Reuters predicted a loss of $7.40 per share.

Since December, GM has received $13.4 billion in US Government loans and is now asking for an additional $30 billion. One has to wonder if they even have a chance of recovering sufficiently to ever repay the loans. Auto sales are still down for 2009 with no relief in sight and GM has no real plan for a comeback, in my opinion. Will anyone step up and buy the Hummer brand or will Saturn be able to spin itself off from the parent? What is GM going to do short-term to staunch the flow of cash? Another quarter like this past one would have them on life support.

Chrysler Claims to Need Another $2 billion

Like GM, Chrysler submitted its plans to Congress today and asked for an additional $2 billion in loans. Chrysler originally asked for $7 billion and was given $4 billion, but since December, the market has worsened and changed their forecast.

Chrysler is reducing fixed costs, production, number of models and selling off assets. Even with all of these actions, it is not enough and so they need more money. Like GM, I wonder about Chrysler's "business as usual" mentality and if they can make radical changes to increase sales. With four upcoming electric vehicles on the horizon, I believe Chrysler can be a success if given a chance.

From Automotive News:

In submitting its viability plan to the federal government today, Chrysler LLC asked for an additional $2 billion beyond the $7 billion in loans it sought late last year and outlined further steps to cut costs.

Chrysler said it will reduce fixed costs by an additional $700 million, cut 100,000 more units of production capacity, discontinue three more model lines and sell $300 million more in assets.

"Since Chrysler LLC's original $7 billion submission, there has been an unprecedented decline in the automotive sector," the company said in a statement. "Based on this, we will require incremental financial support to continue our orderly and effective restructuring."

The Bush administration gave Chrysler only $4 billion of the $7 billion in loans it sought.

The automaker promised to complete its viability plan by the March 31 deadline. Chrysler says it could survive on its own but would be "enhanced through a strategic alliance." That alliance, with Italian automaker Fiat S.p.A., would give Chrysler access to a supply of fuel-efficient small cars.

Highlights of Chrysler's viability plan • Seek $2 billion more in U.S. loans, for a total of $9 billion • Reduce fixed costs by an additional $700 million this year • Eliminate 100,000 units of production capacity • Cut 3,000 more jobs • Sell $300 million in additional assets • Discontinue 3 more model lines • Submit final plan by March 31 • Begin paying back loans in 2012

Concessions Chrysler has been negotiating for concessions with the UAW, dealers, suppliers and debt holders. Chrysler said those concessions have largely been agreed upon. Chrysler's statement said the UAW concessions would make the automaker competitive with transplant manufacturers in the United States. Last year, Chrysler asked Congress for a $7 billion loan to help it survive until the economy turns around. With auto sales running at an annual rate of about 10 million for the first two months of 2009, Chrysler officials acknowledge that recovery won't happen until 2010. Congress denied Chrysler's request. The Bush administration provided $4 billion at the end of December. Before today's announcement asking for an additional $2 billion in loans, Chrysler had said it still needs the other $3 billion to survive. Chrysler suffered a precipitous loss of sales and revenue in 2008. The company's 30 percent sales loss was the steepest among major carmakers in the United States last year. Chrysler claims its restructuring plan, launched in February 2007, was on track until June 2008. That's when fuel prices soared to $4 a gallon and the credit crisis was gathering momentum. The credit meltdown forced Chrysler's captive finance company, Chrysler Financial, to exit the leasing business in August 2008, costing the carmaker 20 percent of its sales volume almost overnight. Since launching its recovery plan, Chrysler has eliminated 1.2 million units of capacity and stopped building four unprofitable models. In the process, Chrysler has slashed its work force by 32,000 and cut fixed costs by $3 billion. Chrysler says it has identified more than $1 billion in unproductive assets and already sold $700 million worth.

Alliances Chrysler is relying on alliances with other carmakers to rebuild itself. Chief among those partnerships is a proposed alliance with Fiat, announced in January. Under terms of the deal, Fiat would supply Chrysler with a range of small cars and sub-2.0-liter engines that will help Chrysler meet U.S. fuel economy requirements. Fiat gets access to the U.S. car market for its products, including the Fiat 500 small car, while Chrysler gets access to Fiat's international markets. The alliance is contingent on U.S. Department of Treasury approval of the $7 billion loan Chrysler originally requested. Chrysler says Fiat will not receive any U.S. taxpayer dollars. Chrysler has taken other cost-saving measures to meet Treasury requirements, including: • Suspending its salary merit pay programs for 2009. • Ending matching contributions for workers' 401(k) plans. • Making top executives sign waivers banning them from taking incentive compensation or golden parachutes. • Eliminating retiree life insurance.

GM Tells Congress It May Need up to $30 billion

General Motors gave Congress its dire outlook today and it wasn't pretty. Business has been in the category of "worst case scenario" since December with no signs of letting up. Instead of being able to turn things around with the $13.4 billion in loans it has received thus far, GM claims to need more. In fact, they claim to need about $30 billion.

Negotiations with the UAW are ongoing and the auto giant has stated it will slash tens of thousands more jobs, but will it be enough? What if the current sales slump persists throughout 2009? How many billions will it take then? Unless GM can change its business as usual mentality, I don't see the company surviving.

From Yahoo News:

General Motors Corp., presenting a dire outlook for the future, said Tuesday it may need $30 billion in total government financing to weather the economic downturn and would cut 47,000 jobs worldwide and shutter five more U.S. factories in a massive restructuring plan.

The automaker is already surviving on $13.4 billion in federal loans and said in a plan submitted to the Treasury Department that it would seek an additional $16.6 billion if economic conditions worsen, but it could achieve profitability in two years and fully repay its loans by 2017.

The U.S. automaker presented its turnaround plan to the Obama administration as it worked to win concessions from the United Auto Workers union and bondholders to dramatically resize the company. The UAW said it reached a tentative deal with GM, Chrysler LLC and Ford Motor Co. on contract changes but discussions were still under way about how the companies would fund union-run trust funds that will take over the companies' retiree health care obligations starting next year.

GM said it was making progress but had not yet achieved all the concessions from union workers, debt holders, dealers and suppliers that the Bush administration sough in the loan terms provided last December.

President Barack Obama's administration will review the plans from GM and Chrysler LLC but could pull the loans if they don't approve the turnaround plans by March 31. The review could be extended into April, but if the government demands the money back it would force the companies into bankruptcy.

GM predicted it could run out of money before the March deadline and said it is seeking the additional funding under a worst-case-scenario projection, as U.S. sales have plummeted to a 26-year low and auto sales have fallen in other parts of the world.

In December, GM said it might need a total of $18 billion in government financing but only got a commitment of $13.4 billion, including $4 billion that the automaker received Tuesday.

GM wants to receive an additional $2 billion in March and $2.6 billion in April. The company has a $4.5 billion revolving line of credit that must be refinanced in 2011 but now believes that private funding won't be available, so the automaker is asking the government to lend the money.

If market conditions deteriorate, GM says it may also need an additional $7.5 billion revolving line of credit to stay afloat, for a total potential request of $30 billion.

GM said it reviewed the potential costs of a bankruptcy filing, but said it was a poor option. If GM was forced into Chapter 11 reorganization proceedings, the company said the only credit available would be from the government, and the cost could reach as much as $100 billion.

GM's plan details extensive cuts. The automaker would reduce its U.S. manpower from 92,000 salaried and hourly workers at the end of 2008 to 72,000 employees by the end of 2012. Worldwide, it envisions slashing 47,000 workers, including 37,000 hourly workers and 10,000 salaried employees.

In its Dec. 2 plan to the Bush administration, GM said it would cut the number of plants from 47 in 2008 to 38 by 2012. But the new approach goes further, cutting an additional five plants by 2012 to a total of 33 facilities.

GM's brands would be reduced from eight to four — Chevrolet, Buick, Cadillac and GMC — as the automaker said in December.

The company is considering a sale of the Hummer brand and a decision could be made by the end of March. The Saturn brand could be phased out by the end of 2011. The company is also considering its options for the Pontiac and Saab brands.

GM said all of its major U.S. vehicle launches from 2009 to 2014 would be high-mileage cars and crossovers.

GM To Get Next Installment of $4 Billion From US Government

General Motors has apparently proven their mettle and will get the next round of government financing. A White House aide leaked this news ahead of today's deadline.

GM has already received $9.4 billion in government loans and this will be their final installment according to the bill that was signed before this past Christmas. Chrysler is expected to receive another $3 billion as well, but we have not heard their decision.

President Barack Obama has decided to launch a government task force for restructuring the U.S. auto industry instead of naming a "car czar" with sweeping powers.

As reported this past weekend, he is appointing Treasury Secretary Timothy Geithner as his "designee" for overseeing auto bailout loans and as co-head of the new high-level panel together with White House economic adviser Lawrence Summers, a senior administration official said on Sunday.

What will happen after they receive this next round of government loans? Will this be enough to right the ship or will it take much more drastic measures and paradigm changes to cure their ills?

Happy President's Day

Whether you had to work today or not, I would like to wish you a Happy President's Day! Let's consider the great men who worked tirelessly in the past to protect our freedoms and liberties as well as helped make this nation great.

Tomorrow is a big day for US auto companies as they present their strategic plans to Congress, outlining thier roadmap to success. Even the UAW, GM and Chrysler resumed talks yesterday, proving that all sides are motivated to make this a prosperous trip. I will be sure to post the very latest as events unfold tomorrow. Let's hope that GM and Chrysler have done all that is possible for them to receive their next round of loans. Especially Chrysler, who has plans for not one, not two, but four different electric powered models.

GM Considers Chapter 11 Bankruptcy as Viability Option

Are you ready to become upset? General Motors now claims that it may have to use the bankruptcy route in order to stay in business. On Tuesday, GM and Chrysler are both scheduled to report to Congress on their progress and plans to reverse their misfortunes and turn their companies around. The reason they need to justify themselves is in order to receive the next round of government loans.

Now, the part of all this that is disturbing is knowing that GM was given 9.4 billion dollars only to go bankrupt two months later. Of course, asking a company that is losing billions of dollars every month to right the ship in sixty days is also a stretch. Maybe Congress will consider this as they review their viability plans and cut them some slack.

As a devil's advocate, let me pose this question. "Is General Motors threatening Chapter 11 bankruptcy just to force Congress's hand into giving them more money?" GM states there are two options at this point, obtain another round of loans or file bankruptcy. What do you think Congress will do? Would they dare let the once proud American icon become bankrupt? As of this writing, GM's sales have not recovered and they are still bleeding cash, which means their loan in December has not accomplished much.

From Automotive News:

General Motors, nearing a Tuesday deadline to present a viability plan to the U.S. government, is considering as one option a Chapter 11 bankruptcy filing that would create a new company, the Wall Street Journal said in its Saturday edition.

"One plan includes a Chapter 11 filing that would assemble all of GM's viable assets, including some U.S. brands and international operations, into a new company," the newspaper said. "The undesirable assets would be liquidated or sold under protection of a bankruptcy court. Contracts with bondholders, unions, dealers and suppliers would also be reworked."

Citing "people familiar with the matter," the story said that GM could also ask for additional government funds to stave off a bankruptcy filing.

GM declined to comment, the story said.

GM and Chrysler LLC face a Tuesday deadline to file restructuring plans to the government in exchange for receiving $17.4 billion in federal loans.

Automakers have struggled as U.S. auto sales have tumbled amid a recessionary economy. U.S. auto sales in January tumbled to a 27-year low.

GM has been in talks with bondholders and the UAW to get an agreement on a restructuring that would wipe out about $28 billion in debt for the auto maker, sources have told Reuters. However, it appears unlikely a deal could be reached by the Tuesday deadline, they said.

GM has already announced plans to cut 10,000 salaried workers worldwide, or 14 percent of its staff, impose pay cuts for most remaining white-collar U.S. workers and has offered buyouts to its 62,000 U.S. workers represented by the UAW.

In addition, it is trying to sell its Hummer SUV and Swedish Saab brands and is reviewing the status of its Saturn brand.

House Passes $787 Billion Stimulus Bill

Well, they are halfway home. All that is needed now is the Senate's approval and then President Obama can sign the 2009 Stimulus bill into law. For car buyers, this means that the income tax paid can then be deducted from your taxes. Not a bad spiff, but it sure would have been more appealing if they would have left in the provision allowing the loan interest to be deducted as well.

From Yahoo News:

Handing the new administration a big win, House Democrats passed President Barack Obama's $787 billion plan to resuscitate the economy on Friday despite a wall of Republican opposition. The bill was approved 246-183 and sent to the Senate, where a vote was scheduled late Friday afternoon.

That vote was to be held open for hours, waiting for Ohio Democrat Sherrod Brown, who was attending a memorial service for his mother and then flying back to cast the deciding vote.

Senate passage would meet a deadline of sending the bill to Obama before a congressional recess begins next week.

The 1,071 page, 8-inch-thick measure combines $281 billion in tax cuts for individuals and businesses with more than a half-trillion dollars in government spending. The money would go for infrastructure, health care and help for cash-starved state governments, among scores of programs. Seniors would get a $250 bonus Social Security check.

Told that no Republican backed the measure, White House press secretary Robert Gibbs reacted by citing another number: "3.5 million jobs that we look forward to saving or creating."

Seven Democrats voted against the bill.

Republicans said the package won't work because it has too little in tax cuts and spreads too much money around to everyday projects like computer upgrades for federal agencies.

"This legislation falls woefully short," said House GOP Leader John Boehner of Ohio. "With a price tag of more than $1 trillion when you factor in interest, it costs every family almost $10,000 in added debt. This is an act of generational theft that our children and grandchildren will be paying for far into the future."

The final $787 billion measure has been pared back from versions previously debated in order to attract support from three Senate GOP moderates — Susan Collins and Olympia Snowe of Maine and Arlen Specter of Pennsylvania. Their help is essential to meeting a 60-vote threshold in the Senate, required to overcome a Republican objection that the bill adds to the deficit.

The bill originally passed the Senate by a 61-37 tally, but Sen. Edward Kennedy, D-Mass., suffering from brain cancer, is not expected to vote this time.

Sen. Judd Gregg, R-N.H., who withdrew his nomination to be Obama's Commerce secretary, said he would vote against the bill.

Democrats lavished praise on the measure, which combines tax cuts for workers and businesses with more than a half-trillion dollars in government spending aimed at boosting economic demand.

"By investing in new jobs, in science and innovation, in energy, in education ... we are investing in the American people, which is the best guarantee of the success of our nation," said House Speaker Nancy Pelosi, D-Calif.

The plan is the signature initiative of the fledgling Obama administration, which is betting that combining tax cuts of $400 a year for individuals and $800 for couples with an infusion of spending for unemployment assistance, $250 payments to people on Social Security, and extra money for states to help with the Medicaid health program for the poor and disabled will arrest the economy's fall.

Local school districts would receive $70 billion in additional funding for K-12 programs and special education and to prevent cutbacks and layoffs and repair crumbling schools. There's about $50 billion for energy programs, much of which goes to efficiency programs and renewable energy.

Some $46 billion would go to transportation projects, not enough to please many lawmakers.

Negotiators insisted on including a $70 billion tax break to make sure middle- to upper-income taxpayers won't get hit by the alternative minimum tax and forced a reduction of Obama's signature tax break for 95 percent of workers.

The AMT was designed 40 years ago to make sure wealthy people pay at least some tax, but is updated for inflation each year to avoid tax increases averaging $2,300 a year. Fixing the annual problems now allows lawmakers to avoid difficult battles down the road, but economists say the move won't do much to lift the economy.

Republicans pointed out a bevy of questionable spending items that made the final cut in House-Senate negotiations, including money to replace computers at federal agencies, inspect canals, and issue coupons for convertor boxes to help people watch TV when the changeover to digital signals occurs this summer.

"This measure is not bipartisan. It contains much that is not stimulative," said Sen. John McCain, R-Ariz., Obama's rival for the White House. "And is nothing short — nothing short — of generational theft" since it burdens future generations with so much debt, he added.

Congress Agrees to Cut Auto Sale Tax Break

One step forward, two back. We had a pretty good incentive to buy a new car but negotiators on Capital Hill decided to strip off the tax refund for the interest paid on the loan. Bummer. I am old enough to remember the days when you could deduct the interest paid on credit cards. Boy, that was nice and let me tell you I had a nice refund every year!

The legislation will now be written such that a car buyer can only get a credit for taxes paid. This reduces the size of the overall bill somewhat and drastically reduces the amount our Government needed to pay for this perk. What I do not understand is why the lawmakers are concerned about $20 billion dollars or so when the entire package will be $785 billion? These numbers are so staggeringly huge that it really doesn't matter if the stimulus bill is $900 billion or $800 billion. The US has 0 billion so all this money will be created out of thin air and cause inflation.

I digress, so here is the story from Automotive News:

A proposed tax break for new-vehicle buyers is dramatically scaled back in the final version of the economic stimulus bill.

Auto dealers and their allies had sought to make interest on auto loans and the sales and excise taxes on new-vehicle purchases deductible from federal taxes. Proponents say those measures are needed to boost showroom traffic and sales.

But the final stimulus bill -- a compromise between House and Senate negotiators -- makes only sales and excise taxes deductible. The loan interest provision was dropped, a spokeswoman for Sen. Barbara Mikulski confirmed today.

Sources said the trim in the tax break for new-vehicle purchases reduced its cost from about $11 billion to about $2 billion. Congressional negotiators sought to limit the cost of the stimulus bill to pacify lawmakers worried about spending.

Mikulski, D-Md., sponsored the original provision on vehicle purchases at the request of dealers. The spokeswoman said Mikulski considers the deduction for sales and excise taxes an important victory.

Final vote as early as Friday

In a statement Mikulski estimated that a family buying a new car will cut its federal taxes $300 to $600.

The National Automobile Dealers Association first called for the broader tax break last November.

The association maintained today that even the scaled-back tax break promises to boost vehicle sales.

"Anything that can help get consumers back into dealership showrooms can also help stimulate an economic recovery," said David Regan, NADA's vice president of legislative affairs.

The stimulus bill now calls for $789 billion in tax cuts and new spending. The House and Senate could vote to approve the bill as soon as today or tomorrow.

President Barack Obama says the bill is needed to prevent a further collapse of the economy and to create or preserve as many as 4 million jobs.

Wade Newton, a spokesman for the Alliance of Automobile Manufacturers, said today that more must be done to get consumers interested in buying vehicles. He said he expects industry groups to look for other legislation to accomplish that goal.

Obama Economic Stimulus Plan May Include Help for Car Buyers

The House has already passed its version of President Obama's economic stimulus package and it was somewhere in the neighborhood of $815 billion dollars. It passed without one Republican voting in the affirmative. The Senate is having a little more difficulty, trying to cut out some of the pork and frivolous spending but have somehow managed to raise the price tag over $900 billion.

There is good news in all of this, believe it or not. Sen. Barbara Mikulski, D-Md., won a 71-26 vote to allow most car buyers to claim an income tax deduction for sales taxes paid on new autos and interest payments on car loans. This is a very significant stimulus and is estimated to be worth $1,500 on a $25,000 car. Of course, the down side is having to wait until you file your taxes next year to get the money. Getting a $1,500 refund next year would sure help to make a few payments though.

The best part of the proposal in my estimation is that the interest on the auto loan is tax deductible. It is almost like getting a 0% loan...almost. I am old enough to remember the days when interest paid on credit cards was tax deductible. Now that really helped get the big refunds!