Auto loan program defended by energy secretary

Detroit— Energy Secretary Steven Chu defended the Obama administration's decision to reject a $730 million loan to the Dearborn unit of Russian steelmaker Severstal OAO.

In July, the Energy Department said it had conditionally approved the loan that was expected to create 260 permanent jobs and 2,500 construction jobs. On Friday, the Energy Department declined to complete the loan — and the steelmaker said it was "deeply disappointed."

Chu noted that about 60 percent of the Severstal project has been completed — or phase one of a two-phase project. "By the time we're getting near where we're making the decision, phase one was done," Chu said. "We shouldn't really be giving loans to projects that have been completed."

The $25 billion Advanced Technology Vehicle Manufacturing program — funded by Congress in September — has only awarded about $8.5 billion in loans to five companies — including $5.9 billion to Ford Motor Co., $1.4 billion to Nissan Motor Co. and about $500 million to both Fisker Automotive Inc. and Tesla Motors Inc.

It received more than 100 requests for funds, and many companies, including General Motors, withdrew requests for funds after lengthy negotiations.

One Michigan start-up automaker told the Energy Department it may move its production plans to China unless it receives a loan. Last month, California-based Aptera Motors Inc. said it was going out of business after it failed to win a $150 million retooling loan.

Chrysler has sought about a $3 billion loan — and the company's CEO Sergio Marchionne met with Chu last week. He told reporters last week the company had reduced its request.

"We hope to move forward but there are no promises as to what will happen," Chu told reporters after an appearance at the Detroit Economic Club.

Republican president candidate Mitt Romney has criticized the loans to start-ups Tesla and Fisker. Chu said he hoped the companies would be able to repay their loans. "I am very hopeful that they can repay their loans — there are no guarantees in the world," Chu said.

Some Michigan members of the congressional delegation are planning to write a letter objecting to the decision to deny Severstal the loan to build high-strength automotive steel.

Many other companies, including A123 and Bright Automotive, are among those still waiting for loans.

Rep. John Dingell, D-Dearborn, said he is working on behalf of several companies with large Michigan operations seeking loans.

"There is an attempt being made by certain members of Congress to kill this program." Dingell said.

On Dec. 27, Rochester Hills-based Bright sent a letter to the Energy Department requesting "the DOE's senior leadership's direct and immediate involvement in moving our application forward to completion."

The company has been in talks for three years to win a loan. The company plans to produce a lightweight road-coupled plug-in commercial work truck in the U.S. that will create more than 675 American-based direct jobs and at least 2,700 indirect jobs.

Bright said in its letter that the Energy Department in December "completed its credit paper and is awaiting an internal decision on the 'purpose of the ATVM program' before advancing the application" to the White House Office of Management and Budget.

Bright warned that if it doesn't receive approval shortly "Bright will be forced to pursue its business plans outside of the United States to fulfill other market needs."

Without a loan, "the jobs and technology that Bright would otherwise create will move to China."

Bright has established a relationship with a Chinese investment firm and has a signed term sheet and is working to finalize a joint-venture in China.

Chu also said the ongoing 60-day White House-ordered review of the Energy Department's loan programs, expected to be completed by Jan. 28, would not stop the department from approving new loans.

But since the review was announced in late October, no new auto loan has been awarded.

Chu said the U.S. auto industry should aggressively export vehicles. "To compete in the global economy, it's not enough for the United States to invent technologies; we have to make them in America and sell our products worldwide. To borrow a Super Bowl line, we want 'Imported from Detroit' to be advertised around the world," he said.

In another issue, Chu said the department hasn't decided whether to go ahead with a major research project at Michigan State University.

In December 2008, the Bush administration announced that MSU was picked to host the Facility for Rare Isotope Beams to study rare nuclear isotopes and the evolution of the cosmos.

The new facility was expected to take about a decade to design and build and to cost an estimated $550 million to build and was to provide research opportunities for 1,000 university and national laboratory scientists.

"I am trying to be as neutral as possible on the project. No decisions have been made," Chu said. "We have to be very careful because we can't be starting six things, and we can only afford four things or five things."

MSU hopes to break ground on the project soon.

dshepardson@detnews.com

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