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U.S. slow to award loans for retooling

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U.S. slow to award loans for retooling

David Shepardson / Detroit News Washington Bureau

Washington -- More than 100 automakers, suppliers and startups have applied for a share of a $25 billion federal loan program intended to help them retool for fuel efficient, environmentally friendly vehicles.

But the U.S. Energy Department has awarded less than $9 billion from the fund, to four automakers and one supplier. And it hasn't approved a new loan in five months. The agency says it is carefully reviewing applications and plans new loan announcements soon.

In the meantime, most applicants who haven't already been turned away are still waiting or have given up. General Motors Co. and Chrysler Group LLC are among those marking time.

Auto suppliers and many politicians want faster action.

"I hope to see the remaining funding allocated as soon as possible," said Sen. Debbie Stabenow, D-Lansing. "Retooling our plants prevents plant closures and saves Michigan jobs."

The Government Accountability Office, Congress' investigative arm, is reviewing the department's handling of the program.

Spokesman Charles Young said GAO is looking at "what the department plans to accomplish through the loans it is making," and how it intends to manage them.

GAO employees have interviewed applicants whose funding requests were rejected, and will announce findings in September.

GM has three separate requests pending, totaling $10.8 billion. Chrysler has sought $8.55 billion, according to records obtained by The Detroit News under the Freedom of Information Act.

The News obtained a list of 97 of the 102 companies that have sought funds. The government withheld the amount sought from 18 of the companies, citing an exemption for "trade secrets" and confidential information.

The loan process was slowed for GM and Chrysler, which exited bankruptcy as new companies last year. The Energy Department is reassessing the two automakers' financial viability in determining if it will approve their requests.

Chrysler is optimistic it will win approval this year. GM expects to get the OK once it begins its new "fresh start" accounting, GM spokesman Greg Martin said.

Ford Motor Co., which sought $11 billion, won a $5.9 billion loan in June, and Nissan Motor Co. won $1.6 billion. Startup companies Tesla Motors and Fisker Automotive were awarded $465 million and $529 million, respectively. Supplier Tenneco was approved for $24 million in October, to produce fuel-efficient parts, including at its Marshall, Mich., plant and do research at its Grass Lake engineering center.

A $25 billion pool

The loan program was seen by some Michigan politicians and other supporters as an urgent lifeline for the struggling auto industry when it finally won funding in 2008.

Altogether, the more than 100 applicants, from glass companies to Goodyear, have requested more than $42.7 billion in loans from the $25 billion pot.

Michigan auto suppliers -- including Delphi Corp., Lear Corp., Metaldyne, BorgWarner, Federal Mogul, ArvinMeritor and Continental AG's U.S. unit -- collectively sought more than $1 billion. But many were rejected or gave up.

Many projects were rejected because they didn't meet the requirement that vehicles must be 25 percent more efficient than models with similar size and performance. Others have struggled to prove they will be financially viable for the 25-year life of the loan, which could be used toward vehicle production or factory construction.

Continental, Lear, Federal Mogul, Metaldyne and BorgWarner are among suppliers who say they are no longer in the hunt for funds.

Program becomes priority

Ann Wilson, vice president for government affairs at the Motor & Equipment Manufacturers Association, said the group is disappointed with the "inability to award these loans to the supplier industry."

The Energy Department said Friday it has made the program a priority. "We're creating American jobs," spokeswoman Stephanie Mueller said. "The department takes time with each application to conduct a detailed technical and financial review process to ensure taxpayer interests are protected."

Some startups are enlisting prominent politicians to push the Energy Department.

Carbon Motors, for example, announced this week that it had reached a deal to buy 240,000 diesel engines from BMW AG. The police car startup says it will start production after it wins a $310 million government loan.

"With some impatience, I have been urging the U.S. Department of Energy to move forward" on Carbon's loan request, said Sen. Richard Lugar, R-Ind.

From The Detroit News: http://detnews.com/article/20100327/AUTO01/3270354/1148/auto01/U.S.-slow-to-award-loans-for-retooling#ixzz0jR2jZHdL

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