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More Money for the Auto Industry

The new Tesla Model SThree more car companies received sizeable loans from the federal government yesterday, but don’t worry; it’s not another bailout. In fact, the$8 billion is just the start of a larger $25 billion project called the Advanced Technology Vehicles Manufacturing Loan Program (ATVM for short) that was thought up back in 2007 and funded by Congress in late 2008 during the Bush administration.

The project, overseen by the Department of Energy, is a federal grant and loan initiative bent on providing low interest capital to automobile manufacturers — as well as the makers of their component parts — to promote the development of new automobile technologies that guzzle less gas — and in some cases, no gas at all.

U.S. DOE Secretary Steven Chu, sharing the stage with President Obama to announce the first round of loans, received a standing ovation from employees of the Ford Motor Co. when he explained that Ford would receive $5.9 billion from the program. By far the largest beneficiary of the three companies named, Ford hopes to have their first check by late July and has grand plans for the cash. They will use the money to overhaul factories to produce 13 greener cars in Illinois, Kentucky, Michigan, Missouri, and Ohio as well as for R&D funding to increase the fuel efficiency of several existing brands, including the Taurus and F-150.

Nissan, a Japanese carmaker with growing manufacturing interests in North America, will use their $1.6 billion to remodel and expand their facilities in Smyrna, Tennessee. By 2012, the plant should be churning out 150,000 fully electric, zero-emissions vehicles and 200,000 lithium ion batteries each year. Nissan claims their new electric vehicle will seat five and have a range of 100 miles between charges.

Receiving the least amount of money of the three is the privately held Tesla Motors. Still, $465 million is hardly trivial, especially when you consider what Tesla intends to do with it. A portion, $100 million, will build a facility to manufacture battery packs and drivetrains; Tesla intends to use these components both for their own cars and other companies’ that they’re hoping to sell to in the near future. The rest will refurbish an old factory — which Tesla is currently in talks to buy — to produce their new Model S sedan, introduced by the company in March.

This latest announcement is just the most recent sign that Tesla is around to stay. In May, Daimler bought 10% of Tesla and a seat on its board, vastly increasing the startup’s access to established engineering know-how — not to mention an international supply chain. Earlier this month, with much pomp and circumstance, Tesla delivered its 500th Roadster, the all-electric sports car that can go 244 miles in a single charge with absolutely no emissions. They recently opened several new showrooms in the U.S., and their first international showroom is set to open in London on Friday. And Tesla has already received over 1,200 deposits for their new Model S — which won’t even be produced until 2011.

At the announcement at the Ford plant in Detroit, President Obama stressed that the loans from this program would help companies involved at all levels of automobile manufacturing meet the fuel economy standards his administration announced earlier this year “while helping [America] to regain [its] competitive edge in the world market.” Secretary Chu reiterated, “By supporting key technologies and sound business plans, we can jumpstart the production of fuel efficient vehicles in America. These investments will come back to our country many times over — by creating new jobs, reducing our dependence on oil, and reducing our greenhouse gas emissions.”

Well, here’s hoping.

Photo Credit: dpstylesTM at flickr

Written by Lisa Wojnovich

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  1. Regarding the politics of the DOE ATVM Loan awards:
    So it turns out to be all the best loans money can buy.
    Ford paid over $14M to elected officials and consultants in order to get the loan. Ford paid the third largest amount and Ford got the third largest loan. This is disclosed in public records searches and lobby filings just revealed. 21 elected officials had direct benefit from the deal.
    Nissan paid over $10M to elected officials and consultants in order to get the loan. Nissan paid the third largest amount and Nissan got the third largest loan. This is disclosed in public records searches and lobby filings just revealed. The law and public statements by elected officials state that the money was to increase American competitiveness for America car companies yet the money was given to a Japanese company who will send all of the profits back to Japan. 7 elected officials had direct benefit from the deal.
    Tesla paid over $100,000.00 to elected officials and consultants in order to get the loan. Tesla paid the third largest amount and Tesla got the third largest loan. This is disclosed in public records searches and lobby filings just revealed. Tesla’s filings show that their business model is unsustainable compared to competitors, that they were 200% off on the BOM of their car, that all of their first funding was wasted so they have to pay back twice as much to investors as competing companies and that their technology is so old, it all needs to be redone yet they still got money. 18 elected officials had direct benefit from the deal. Tesla did not even read the rules for the loan and planned to build a building when the NEPA rules make that option impossible so they had to restart the process, which is supposed to put one into a new cycle yet they were kept in the previous cycle and put ahead of Fisker, Bright and others who had applied earlier than Tesla. Tesla provided massively creative accounting records to show that they were financially sustainable and have issued numerous press releases to try to make people think that but, in fact, the truth is that they are not because of bad management issues that they cannot get past.
    The ATVM program was created by Ford, GM & Chrysler lobbyists to pad their company’s pockets and those three had pre-hardwired the entire $25B for their own pockets but something happened in the process when Senator Bingaman added a few key lines that opened the door for OTHERS to apply to build green technology and required that those who get the money were “financially sustainable” businesses. Back when the ATVM was authored to save Detroit, it was fully known that Detroit was going to go bankrupt. Ford had the same problems as GM and Chrysler but they went around the world getting bailout money instead of going first to US funds. As law required public exposure of the bankruptcy, Bingaman’s brilliant plan to finally create a green transportation industry was revealed. The very people that had stopped green cars for over 100 years suddenly became the first people to, accidently, cause them to happen but now others could do it too.
    Bingaman should get the Congressional Medal of Honor for pulling off this impossible trick and finally giving America the Electric Cars it should have had for the last hundred years.
    Once Detroit realized this, they tried to hijack the whole ATVM program with a takeback at the end of 2008 but that effort was defeated by a close late night vote. Now that it was out there, Detroit lobbyists and influencers fought to get the review of applicants delayed for as long as possible because they realized that, in a recession, most of the smaller competing interests could be forced to go out of business if they could just be kept away from the money for long enough. Major American TARP banks have said that the standard commercial loan process that each of these 26 applicants (not hundreds of applicants- There were 26 applicants in the round) should take 4 weeks at the longest and 3 weeks nominally. It seems clear that the loans were delayed due to political agendas and not process issues.
    Bright Automotive had applied on time, ahead of the others, turned in low overhead numbers and a great path too profit but they were virtually ignored while intensive meetings were conducted with Nissan, Ford and Tesla because those parties paid for it. The law says that this, and the purchasing of favors, gave those parties an unfair business advantage using taxpayer dollars, over Bright. A case Bright would easily win if they choose to run with it.
    Clearly, it isn’t over yet. Stay tuned for the Senate, Congressional, Ethics Committee and media reviews of this one. Watch for the charts connecting who-to-who. (It is OK to re-post this)

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