By on March 29, 2010

With a mere $9b awarded so far, the Department of Energy’s Advanced Technology Vehicle Manufacturing Loan program is a long way from fulfilling its $25b promise to fund a turnaround in America’s green auto sector. So far, Ford has received $5.9b for a wide range of retooling projects (not a bailout, per Ford PR), Nissan has received $1.6b for Leaf production in Smyrna, TN, while startups Tesla and Fisker have received $465m and $529m respectively. According to the Detroit News, the rest of the 100-odd applicants for the $25b pool are stuck waiting, and with about $42b in total pending requests, not everyone is going to get a rose from the Feds. Predictably, the whining has begun.

Michigan Senator Debbie Stabenow tells the DetN:

I hope to see the remaining funding allocated as soon as possible. Retooling our plants prevents plant closures and saves Michigan jobs

But if we’re to believe that GM and Chrysler will both have their requests fully funded, there isn’t going to be much left for the other 90 or so applicants. And as with the bailout, suppliers are the first to be left behind. A number of suppliers including Delphi Corp., Lear Corp., Metaldyne, BorgWarner, Federal Mogul, ArvinMeritor and Continental AG’s U.S. unit have collectively sought about $1b, but have already given up. Motor & Equipment Manufacturers Association government affairs VP Ann Wilson, says the trade group is bummed about the DOE’s “inability to award these loans to the supplier industry.”

Meanwhile, BNet reports that the secretive (and vapor-y) Louisiana firm V-Vehicle has been turned down, and cop car firm Carbon Motors is looking like it will be left behind. Though Carbon raised some eyebrows by securing BMW engines for its purpose-built patrol cars, its entire business plan appears to be contingent on a $310m ATVML loan. As BNet’s Jim Motavelli points out, Carbon’s foreign-sourced engines and Detroit competition seem to doom the prospect of a Carbon loan.
With Detroit poised to gobble up the rest of the DOE’s loans, the little guys are lashing out. According to XP Vehicles founder Scott Redmond, “only Detroit companies or people connected to big companies or venture capital” have a chance at the loans. And though his thesis has proven true so far, and though the Feds have every incentive to keep funneling cash into Detroit’s zombies, it’s important to not romanticize the alternatives too much. Even with GM’s tragic history, The General seems to be a marginally safer investment than firms like XP Vehicles, Th!nk, or motorcycle/3-wheeler firms like Aptera and Brammo. After all, the ATVML program already has longshots in its portfolio, in the form of Tesla and Fisker. That having been said, Chrysler’s on-again-off-again alt-energy programs (not to mention its general underperformance and poor odds of survival) make it a longshot itself.
It’s ironic that we’re nearly at the one-year anniversary of the auto bailout, and the topic of TTAC’s first-ever Bailout Watch is still less than half-spent. At the time we assumed that Detroit would be the main beneficiary, with the possibility of a few hand-selected little guys joining the fun. That the government should continue to sink cash into Detroit is tough to argue at this point, as it can only help the firms IPO sooner, bringing the national experiment with automaker owner to a long-overdue close. Especially considering that the ATVML is ostensibly a loan program, which will eventually need to be repaid. The issue of whether favoring Detroit at the expense of the nation’s EV startups stifles innovation or makes sound financial sense is a the bigger question. And it’s too bad that a healthy debate on that topic won’t actually change the outcome.
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7 Comments on “Where Are Those DOE Retooling Loans Anyway?...”

  • avatar

    Shouldn’t one of the main pre-requisites for a re-tooling loan be that you have existing tooling that needs upgrading? These small new companies that are begging for money should already have pretty good facilities & equipment, and if they have none, they shouldn’t qualify. This money isn’t supposed to replace venture capital.

  • avatar

    The main requisite is that for every $ you spend of the DOE money you have to spend $2 of your own on specific products, Ford was lucky in a way b/c when the prgram was introduced it was already retooling accross NA. I think that is the main hold-up for alot of the other companies, tesla has the funding, for most, especially in the recent economy, alot couldn’t secure thier 2/3.

    P.S. thank you for not using RF’s imaginary Ford DOE loan number.

  • avatar

    Thank you for finally covering the clusterf*ck that is the ATVM Sec 136 program. I have so much to say about this fiasco, but in the interest of keeping it under several pages I’ll breakdown the main problems.

    1) Lack of transparency. Who has applied? Who has been turned down? Why? Why is it taking over 1 year to give a yes or no? Either you’ve got it (whatever it is the DoE is looking for) or you don’t. We know NOTHING about the companies that have applied, other than what great insider blogs like TTAC have covered. The general public is in the the DARK.

    2) Time. As I said it’s been over 1 year since the program went into effect. If the point is to push companies to build new green vehicles (and of course hire Americans to do so), what possible gain is there in waiting this long to dispense the cash.

    3) Political back room bullsh*t. I know of one company, in particular, who was basically told, we like your program, just go find a “partner” in Detroit, and we’ll move you right along. WTF? We are spoon-feeding the beast that screwed up, and forcing the little guys to go hat in hand looking for a “partner” who will basically do no engineering, no design, no marketing, and nothing to add value other than their name.

    There’s lots of other detailed crap, but to address the comments by MidLife,

    -“these small new companies that are begging for money should already have pretty good facilities and equipment” ummmm, no, not exactly. Small new startups LACK the CAPITAL for pretty good facilities, that’s why they are asking for the loan (not to be confused with a bailout).

    -“money isn’t supposed to replace venture capital” You’re correct, and it doesn’t. If a startup needs $300M to get up and running, the DoE is only going to fund roughly 2/3 of that with a low interest loan. The VC guys get to throw in $100M in that case. The loan is CONTINGENT upon the company raising ALL of that VC money. Knowing a lot of VC players, I can assure you there is a cart and a horse, and the horse (VC) will not come before the cart (DoE). In any event, VC plays the major role in getting these guys off the ground.

    At the end of the day, if the DoE was only going lend money to the Big 3 and politically connected Tesla and Fisker, they should have just said that and moved on. Call it the “Established and Connected Green Vehicle Loan Fund.”

    Instead they manuever, postpone, filibuster, delay, and demand ridiculous criteria of some very hardworking, knowledgeable, and capable groups, all so they can forward more checks to Detroit pockets.

    FWIW, I’m not advocating any Tom, Dick, or Aptera just be granted unlimited dollars, but some transparency and accountability would be nice (Imagine that!)

  • avatar

    What exactly has Ford retooled?

    • 0 avatar

      Multiple truck factories to car, standardizing the plants that will build the world platforms as they come on-line in US (car will be built on the same line with the same tooling, world wide). powertrain plants, etc.

      There’s an extensive list somewhere.

  • avatar

    Jeez a simple google search will show you a few:
    Ky Truck $200m
    Windsor Engine $736m
    Cleveland Engine #1 $155m
    Mi Truck $550m

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