By Kendra Marr
Washington Post Staff Writer
Wednesday, June 24, 2009
Three automakers will receive nearly $8 billion in federal loans to boost production of fuel-efficient vehicles in the United States.
This first tranche of a $25 billion program will help Ford, Nissan and Tesla Motors offset the costs of retooling factories and creating advanced-technology vehicles to meet the government's new fuel standards. The U.S. auto industry has been awaiting this dispersal ever since Congress authorized the program in 2007. But the money wasn't appropriated until last year, and the Energy Department has been reviewing hundreds of applications.
"Transforming the American automobile industry will not be easy, but we know it can be done," said Energy Secretary Steven Chu, addressing a crowd yesterday at Ford's Research and Innovation Center in Dearborn, Mich.
The loans come as the U.S. auto industry is facing one of its biggest downturns. Car companies are cutting production and laying off scores of employees. President Obama yesterday signed an executive order to establish a White House Council on Automotive Communities and Workers, an interagency committee tasked with helping auto workers transition to new industries. Ed Montgomery, the president's point man on distressed auto towns, will serve as the executive director.
"I'm not going to sugarcoat this," said Vice President Biden, who was in Ohio yesterday to make the announcement. "Manufacturing is facing one of its toughest periods, in at least my lifetime."
Over the past decade, the manufacturing industry has lost more than 400,000 jobs. And the Obama administration has been pushing for new manufacturing activity through loan programs, the president's stimulus funds and legislation such as the cash-for-clunkers bill.
Under the Energy Department program, Ford will receive $5.9 billion through 2011 to revamp 11 factories in Illinois, Kentucky, Michigan, Missouri and Ohio. The automaker will raise fuel economy for more than a dozen models, including the Taurus and F-150. Chu said the loan will help place about 35,000 employees into green engineering and manufacturing jobs.
"This is the kind of partnership that will help American manufacturing not just survive, but thrive," said Ford chief executive Alan R. Mulally.
Nissan, a Japanese automaker, will receive $1.6 billion to build all-electric cars and battery packs at its plant in Smyrna, Tenn. These all-electric cars would get an equivalent of 350 miles per gallon. Nissan aims to build 150,000 vehicles each year, which would create up to 1,300 jobs in Smyrna. The loan will also help the car company construct a new battery plant, which would build 200,000 batteries a year.
Tesla, a six-year-old start-up in San Carlos, Calif., will get $465 million. The first part of the loan will finance a plant for its $49,900 Tesla Model S sedan, an all-electric car that's half the price of the company's luxury electric roadster. The sedan will get an equivalent of more than 250 mpg. By the end of 2013, Tesla aims to produce 20,000 vehicles each year, creating 1,000 jobs.
The second part of Tesla's loan will be used to build a facility to manufacture battery packs and electric drive trains for Tesla and its partners, such as Daimler. By 2013, Tesla aims to build 30,000 packs, and the new California facility would employ 650 people.
Ann Mesnikoff, director of the Sierra Club's clean cars campaign, cheered the administration's pick of a non-traditional car company such as Tesla.
"We need to get new companies who are manufacturing vehicles in a different way," she said. "Tesla is focused on high-efficiency vehicles. It really has the possibility to drive technology forward."
Chu said these loans help the auto industry "meet and even exceed" President Obama's new fuel standards for cars, which will rise from 27.5 to 35 mpg by 2016.
The Energy Department is working with General Motors and Chrysler on their applications for these retooling loans. The process has stalled in recent months, as both automakers struggled to keep themselves afloat. The program dictates that companies must be "financially viable" to receive the loans, so the car companies would not qualify until they emerge from bankruptcy.
"We are trying to stretch the money as far as we can," Chu said.
But the program could grow. Sen. Debbie Stabenow (D-Mich.) said the energy and climate change bill currently being debated includes a provision to increase the program's funding to $50 billion.
"It matters where things are made," she said. "We don't want to create incentives for jobs to go overseas. We can do it in Michigan."
Yesterday, Rep. Gary Peters (D-Mich.) delivered a petition signed by 20,000 people to GM's headquarters urging the automaker to build its new line of small cars at its plant in Orion Township, Mich. By the end of this month, GM is expected to announce if it will use its facility there, or the one in Spring Hill, Tenn., or Janesville, Wis.