Market News

 August 27, 2013
Obama may revive $25 billion auto loan program

 U.S. Energy Secretary Ernest Moniz says the Obama administration is considering reviving the moribund $25 billion auto loan program by revising lending criteria and seeking a new round of loan requests.

Created by Congress in 2007, the Advanced Technology Vehicle Manufacturing Program hasn't made a new loan since March 2011 and came under scrutiny after two of five companies that received loans halted production. The auto loan program was created to spur the production of more fuel-efficient vehicles in the United States.

"We are looking at what a new (loan) solicitation might look like. That's an ongoing discussion," Moniz said in a Detroit News telephone interview on Monday from New Jersey, where he was traveling to a speech. "We are actively looking at what might be an effective new (request for proposals)."

The program gave preference for low-cost government loans to established automakers to retool older plants to build advanced vehicles, but also allowed start-up automakers to take part. The Energy Department has awarded less than $9 billion for auto plant retooling.

Moniz confirmed Monday that the Energy Department --- which had initially received more than 100 applications for loans in 2008 and 2009 --- is not actively considering any applications for new retooling loans.

"There's no active consideration," Moniz said.

Many companies, including General Motors Co. and Chrysler Group LLC, abandoned their requests for loans after years of talks with the department.

But other loans have performed well: $5.9 billion to Ford Motor Co.; $1.4 billion to Nissan Motor Co.; $465 million to EV startup Tesla Motors, which in May paid off its loans nine years early.

Sen. Debbie Stabenow, D-Lansing, and other members of Congress have pushed Moniz to look at ways to expand the program to include others, such as auto parts suppliers.

Moniz said the department has "a lot of authority" left in both the auto loan and another program that funds renewable energy systems, electric power transmission systems, and bio fuels.

He praised the Energy Department's loan program office for its "due diligence and I think it shows in the portfolio."

The department recently named a new executive director of its loan programs office, Peter Davison, who was energy and economic development at the Port Authority of New York and New Jersey and a former chief of New York State's economic development agency. Moniz called Davison "terrific."

Moniz says he is "pretty bullish" on EVs and says that while the industry may not meet President Barack Obama's 2008 campaign goal of 1 million plug-in electric vehicles by 2015, it could happen in 2016 if EV growth continues at current pace. He said the auto industry could potentially hit 100,000 plug-in vehicles in 2013.

"Of course, the more you deploy, the harder it is to maintain that rate of acceleration. But it's not like it's completely on the moon --- this kind of idea of a 1 million --- maybe a bit beyond mid-decade," Moniz said.

Last month, a Republican-led House Appropriations Committee's panel voted to cut the remaining funds in the $25 billion Advanced Technology Vehicle Manufacturing loan program, in part to pay for more wildfire fighting.

The auto loan program has struggled.

In February, Vehicle Production Group LLC --- a Michigan-based startup building wheelchair-accessible compressed natural gas vehicles that won $50 million in loans in March 2011 --- stopped production.

Another recipient of $529 million in loans, Fisker Automotive Inc., had its Energy Department reserve seized by the government and had about $300 million of the loan rescinded. The electric vehicle maker hasn't been able to build a car since July 2012 and has been searching for a buyer as it tries to avoid bankruptcy.