WASHINGTON/DETROIT — The $2 trillion economic rescue package before the U.S. Senate on Wednesday would send the federal government to the auto industry’s rescue for the second time in a dozen years.

Automakers are fearful of being tagged as seeking a new government bailout so soon after the 2009 government-funded auto restructurings. Detroit has not sought industry-specific assistance and instead made the case the entire economy needs urgent access to liquidity.

Republican Senator Pat Toomey said Wednesday the deal sets aside $454 billion to make loans or loan guarantees for companies across all sectors, as well as states.

He said it was more likely the money will be used to leverage even more funds in loans from the Federal Reserve. Toomey told reporters on a conference the Treasury will then be able to make loans, purchase loans or purchase corporate debt, which could be a major boost for automakers.

Toomey called the bill “the biggest government intervention in the economy in the history of the world.”

Industry officials, especially at General Motors, were eager to avoid the appearance of a federal bailout. Sales suffered and the No. 1 U.S. automaker was nicknamed “Government Motors” after its $50 billion bailout in 2009, when congress also approved a $3 billion “Cash for Clunkers” program to spur demand.

The UAW and the Detroit 3 automakers recently discussed sending a letter to Capitol Hill explaining why the industry needed a source of liquidity, but GM ultimately declined to sign the letter and it was not sent, people familiar with the matter said.

The final package contained no benefits targeted specifically at automakers. By contrast, U.S. airlines are set to receive $25 billion for payroll costs in cash grants that do not need to be paid back.

John Bozzella, who heads an automotive trade group that represents U.S. and foreign automakers, said last week that “at this point we are focused not on specific industry measures but focused on broader economic measures.”

Aid not ruled out

Still automakers do not rule out seeking additional help if auto sales or production remain frozen.

But automakers and suppliers stand to benefit from other provisions, including a 50 percent employee retention tax credit, and suspension of the employer share of payroll taxes for two years.

GM and its employees paid more than $3.15 billion in state, local and payroll taxes in the United States in 2018.

Credit rating agencies have identified the automotive sector as an industry most in need of assistance. A group representing major U.S. and foreign automakers sent a letter to U.S. lawmakers with other industry groups calling for loans and loan guarantees to companies of all sizes.

GM, Ford Motor Co. and Fiat Chrysler Automobiles have halted North American vehicle production until at least March 30, and people briefed on the matter said they plan to extend that into April. Michigan and other states with auto plants have instituted stay-at-home orders until at least April 13.  

Automakers will get some tax benefits, but the government loans are the biggest help, sources said. Aid will also be available to auto dealers and thousands of smaller suppliers. Funds for U.S. consumers also could stimulate new car sales again once stay-at-home orders lift.

Better financial shape

The Detroit 3 and most larger suppliers are in far better financial health than they were ahead of the 2008-2009 crisis. Balance sheets at all three companies are healthier, and GM and Ford moved this month to build cash reserves further by drawing down a combined total of more than $30 billion from credit lines.

In the supply chain, dozens of major parts makers had already been through bankruptcy reorganizations before the Great Recession even began. 

The global auto industry now is bracing for worldwide sales to plummet more than 12 percent from 2019, worse than the two-year peak-to-trough decline of 8 percent during the global recession in 2008-2009, research firm IHS Markit predicted on Wednesday.

The Senate package could help badly stressed, smaller suppliers.

“I’m working with four middle-market suppliers — $150 million in revenue to about $400 million in revenue — and most of these companies are not all that well capitalized,” Steve Wybo, auto group practice leader for restructuring consultancy Conway MacKenzie, told Reuters.

RoMan Manufacturing Inc. is a family owned manufacturer of transformers and glass molding equipment for automakers and other industries based in Grand Rapid, Mich. Co-owner Bob Roth said its balance sheet is “rock solid,” but he is clamping down on spending as he sees other manufacturers pleading for relief from bank loans.

Normally, he said, “we pay all bills on the 10th and 25th, now we’re moving to one payment cycle a month.” He told members of the families that own the company “we won’t pay a quarterly dividend for a while.”