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DOE Loans to Retool Auto Plants Still Alive, Despite Slowdown

DOE Assistant Secretary David Sandalow warns a new national budget trimming spending by $38.5 billion will affect the government’s ability to fund certain energy-efficient and renewable-energy programs.

DETROIT – The U.S. Department of Energy remains committed to disbursing billions of dollars in loans to help the nation’s auto makers and suppliers retool facilities for advanced technology vehicles, a ranking government official says.

“Absolutely, by all means,” DOE Assistant Secretary David Sandalow tells Ward’s on the sidelines of the annual Society of Automotive Engineers 2011 World Congress here.

Sandalow’s confirmation comes at a time when the DOE clearly has stepped back disbursement of the $25 billion set aside in 2007 for the program, meant to spur deployment of highly fuel-efficient cars and trucks.

So far, just over $7 billion has been handed out, including $4.9 billion to Ford and $1.4 billion to Nissan. Electric-vehicle startups Tesla Motors and Fisker Automotive, together, have received about $1 billion in low-interest taxpayer loans.

But since Fisker got its money in September 2009, which it will use to retool a former General Motors plant for the Nina plug-in coming in 2012, the only additional award since was $50 million to The Vehicle Production Group finalized last month.

A key element of the loan process hinges on the applicant proving its viability, and with the industry still recovering from the recession the DOE reportedly is more closely scrutinizing awards.

According to Washington’s own watchdog, the Government Accountability Office, some funds already awarded may have been improperly used by auto makers outside the U.S. The GOA also says understaffing at the DOE has led to delays.

Chrysler currently awaits word on a $3.5 billion request, which CEO Sergio Marchionne recently told journalists the auto maker could put to use on vehicle programs immediately.

GM withdrew its application for $14.4 billion, saying it would prefer not to carry the debt on its balance sheet and would make the investments, itself.

Sandalow declines to comment on the status of Chrysler’s application, but says additional loan sources made available recently to auto makers and suppliers will provide more financial assistance for retooling and research and development.

“Our loan program overall has accelerated with new commitments over the last several months,” Sandalow says. “The pace is really picking up.”

However, a new national budget reached last week trimming spending by $38.5 billion will affect the government’s ability to fund certain energy-efficient and renewable-energy programs, he warns. The programs support technology research into reducing petroleum use in transportation.

“The details are still being worked out, but there are some cuts. But we will march forward to promote clean energy, and we’ve got the budget to do it.”

As U.S. gasoline prices continue to rise above $4 per gallon, Sandalow says the Obama Admin. will continue to push for the rollout of more alternative-propulsion vehicles. “In order to solve this problem, we need to move to a vehicle fleet that depends less on petroleum. We need more efficient vehicles on the road.”

The administration’s goal to put 1 million battery-electric vehicles and PHEVs on the highway by 2015 appears promising, he adds: “Looking good. If you look at the plans of the major automotive manufacturers, there is a clear pathway to 1 million. The pace of innovation in this industry is extraordinary.”

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