Where Are Those DOE Retooling Loans Anyway?
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 jobsPlus, it keeps the bailout babies alive a little longer. After all, GM said last Summer that it was “counting on” its $10b chunk of the DOE handout. So what’s the holdup? Like the bailout, “financial viability” is a requirement for the loan program, and the DOE still isn’t convinced GM or Chrysler make the cut. Nor could they be convinced: GM still has yet to release “fresh start” accounting results, having only given out non-GAAP-approved results. GM spokesfolks say that the $10b will hit its bank accounts when new financial results come out next month. Too bad it will also hurt The General’s whole “we’re paying back taxpayers” PR narrative. For its part, Chrysler says it is “optimistic it will win approval [of its $8.55b request] this year.”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 r aised 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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