By Kevin Krolicki
FLINT, Michigan (Reuters) - General Motors Corp Chief Executive Rick Wagoner said on Thursday that September U.S. auto sales were running about flat from August, but held out hope a federal auto loan package, tax breaks and a banking bailout, all pending in Congress, would support demand.
"The market this month seems kind of like last month," Wagoner told reporters. "Last month, we also had tight credit, so I think there's no question that it's affecting automotive activity. I can't tell you honestly as we sit here today that it seems worse than last month, but certainly no better."
August U.S. auto sales marked the 10th straight month of declining sales, the longest such downturn since the 2001 recession. Industry-wide sales fell almost 16 percent to an annualized rate of 13.7 million units for the month.
Many expect U.S. auto sales to remain flat at best in 2009 with a recovery back to the 16 million level that held until last year delayed until early in the next decade.
Wagoner, who was speaking on the sidelines of an event to mark GM's decision to build a new $370 million engine plant in Flint, Michigan, said he hoped the $700-billion bad loan bailout before Congress would also ease pressure on the auto finance market and its finance affiliate GMAC.
"Anything they can do to loosen up that logjam for automotive credit is going to help from the standpoint of production, employment and demand for vehicles," he said.
Wagoner said it was unclear how much of a $25 billion package of taxpayer-backed, low-cost loans for the auto industry GM would qualify to borrow.
The House of Representatives has approved funding for the auto loans. The Senate plans to follow shortly and President George W. Bush is expected to sign off before October 1.
Enactment would represent the first U.S. government financial aid for the auto industry since the 1980 bailout of Chrysler with $1.2 billion in loan guarantees.
Wagoner said GM's development of the all-electric Chevy Volt and its investment in two-mode hybrid systems could be funded under the strict terms spelled out in the 2007 energy bill that created the framework for the loan program.
But he also said the automaker, which is scrambling to shore up its cash position, was hoping for more liberal rules that would allow the loans to be used more widely.
"We'd like to see them to include all new technologies with significant improvements in fuel efficiency," Wagoner said.
Michigan Gov. Jennifer Granholm, who helped broker a package of tax incentives for the new GM engine plant and joined Wagoner on Thursday, expected most of the federal loan package to go to the Detroit automakers.
"Clearly, we are the automotive capital of the United States and of the world, and this loan program is for the auto industry," Granholm said. "I think the bulk of it will be to help Ford, GM and Chrysler."
'DEFENSIVE' MOVE
Wagoner said GM was looking to move faster with an already announced $10 billion program of cost cuts to shore up cash and was readying asset sales, and remained prepared to borrow "if the markets open."
GM said last week it would draw down the $3.5 billion remaining on its $4.5 billion secured revolving credit facility, a step Wagoner said was taken because of the pressure on credit markets.
"These are very unsettled times in the market," he said. "We basically did it as a defensive move."
GM plans to begin construction next month on the new Flint plant. The plant will build GM's next-generation of four- cylinder engines, part of an effort by the automaker to shift its focus to meet the growing demand for smaller cars.
The new plant, scheduled to start production in 2010, will build a turbocharged 1.4 liter engine for the Chevy Cruze small car and another version of the engine to provide backup power to the Chevy Volt.
In a separate move to help GM and the auto industry, the Senate this week approved a measure that would give consumers a tax break of up to $7,500 for buying a plug-in such as the Volt.
GM, which plans to roll out the Volt in 2010, has said the rechargeable car could cost more than $35,000, and Wagoner said the tax credits would help to bring down that cost.
"It makes sense that the government should stimulate that technology and I think we're going to need to see more of that if we want to move away from such a heavy reliance on petroleum," he added.
(Reporting by Kevin Krolicki, Editing by Maureen Bavdek and Andre Grenon) ʘ