Bill to Assist Defense Firms Hit by Cutbacks
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A bill that would create $5 billion in federal loan guarantees for troubled defense firms, possibly including McDonnell Douglas, will be introduced Wednesday by House Majority Leader Rep. Richard A. Gephardt (D-Mo.) and Rep. Barbara Boxer (D-Greenbrae).
The legislation would appropriate $1 billion, enabling banks to offer $5 billion in low interest rate loans to firms hurt by the defense downturn or competition from foreign firms that receive government subsidies, congressional sources said.
Although the legislation is intended to offer the loan program across U.S. industry, it is intended mainly to address McDonnell’s preliminary agreement to sell up to 40% of its commercial aircraft business to Taiwan Aerospace Corp. for $2 billion.
McDonnell did not ask for the legislation and has not said it would drop its Taiwan deal if it is passed, House sources said. McDonnell officials declined to comment Tuesday.
In the past, McDonnell has said financial assistance is just one factor in its Taiwan agreement. It also believes that an Asian partner can broaden its market access and could help reduce production costs.
But Gephardt and Boxer, who are scheduled to announce the bill at a press conference today, are hoping that uncertainty in the Taiwan deal will cause McDonnell to at least examine the legislation as an alternative.
The agreement originally was to be consummated last January, but now appears headed for renegotiation after the submission of a favorable Taiwanese government report this week.
The House sources said that since the loan guarantees would eliminate any default risk for lenders, the loans could be made available to McDonnell at the lowest commercial rates available. In addition, the legislation may provide for the U.S. government to subsidize the interest rate on the loans, the House sources said.
In addition to the loan guarantees, the bill would require the U.S. trade representative and National Aeronautics and Space Administration to assist U.S. aerospace firms in dealing with subsidized foreign competition.
