The trouble lies in expected subsidy cost estimates, which Congressional Budget Office director Peter Orszag recently announced could realistically be set at about 30% - meaning about $7.5 billion of the $25 billion in secured loans would have to be paid by Congress. The same office had predicted a subsidy cost of about 15% earlier this year, but worsening credit conditions at almost all of the major carmakers has caused the CBO to revise its figures, reports The Detroit News.
That result is somewhat ironic, since the reason the industry is approaching Congress in the first place is that its poor collective and individual credit situation is preventing it from acquiring affordable rates on private loans. If the same credit ratings are used to keep government loans from being issued, the industry could be stuck in a very dire position with expensive CAFE regulations in the near future, a soft economy and tanking vehicle sales making for a perfect storm of crippling debt.