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Only four companies, including Tesla Motors Inc., have received loans from the DOE, despite the fact that many have asked for funds.  (Source: Tesla Motors Inc.)

The Department of Energy has sufficient money to fund at least $18B USD in loans, but it has only given out $8.3B USD, thus far. The process is so difficult, some smaller companies have reportedly given up.  (Source: Grunley)
The DOE received billions to give out to high-tech automotive firms, but has only given out a small fraction of that money

Taxpayers wrote automakers, suppliers, and start-up companies a loan check for $42.7B USD to develop fuel-efficient vehicles.  While the public has mixed feelings on the government stepping into the free market, it is not unusual -- Chinese, Japanese, South Korean, and European automakers (virtually every global automotive power) enjoy similar high-tech loan programs.

And regardless of your feelings on the loan program itself, what likely will disturb critics and advocates alike is the fact that most of the money granted from Congress is sitting in the U.S. Department of Energy's bank account, unused.  

The DOE has been hesitant and unwilling, thus far, to give out the funds in many cases.  Some have accused it of hoarding the money and hurting start-ups.

Thus far companies have requested $25B USD of the $42.7B USD, but the DOE has only delivered approximately a third of the amount -- $8.5B USD.  

More troubling still is the fact that smaller companies have been entirely overlooked, while the government has shown favoritism to a handful of elite automakers.  Thus far the only parties to receive loans are Ford, which asked for $11B USD and received $5.9B USD in September 2009; Nissan which received the $1.4B it asked for in January 2010; California-based Tesla Motors which received $465M USD in January 2010 to develop its next generation electric vehicle, the Model S; and Fisker Automotive, who obtained a $529M USD loan in April 2010 to retool a former General Motors factory in Delaware, which it will use to produce its upcoming EV.

Smaller companies have thus far not received funding, though reportedly many have applied.  John D. Thomas, CEO of ALTe LLC, spoke with The Detroit News on this trend.  Mr. Thomas's firm is among the smaller firms who requested funding, but hasn't received it.  While he says his company won't fold if the loan request goes unfilled, he says other firms may be less fortunate.  He states, "Some entrepreneurial startup companies are really struggling to stay alive long enough to realize the finish line."

The lone sign of hope for these firms is Vehicle Production Group LLC, an Indiana startup that may soon receive a loan to build a wheel chair powered by compressed natural gas.  While the loan isn't yet official, the DOE announced it in November.

The Detroit News used The Freedom of Information Act to obtain testimony by members Congress discussing the DOE's laggard response.  States Sen. Dianne Feinstein, D-Calif., "Reviews of pending applications are falling behind schedule. On multiple occasions, the department has missed internal deadlines for initial decisions, term negotiations, final decisions and loan closure."

She accuses the DOE of not only lacking a timeline for application approval, but says that the process to get a loan is overly "difficult".

Sen. Evan Bayh, D-Ind. adds in a letter of concern to Energy Secretary Steven Chu, "While the U.S. has the technology and expertise in this industry, it lacks domestic production capacity and a sustained federal commitment. Consequently, our nation is falling behind."

A DOE spokeswoman, Stephanie Mueller claims the situation is improving.  And she reiterates, "[The DOE] has committed and closed four totaling $8.3 billion [in loans]."

Even some larger companies are becoming frustrated by the hold-up.  The cash-strapped Chrysler Group LLC asked for $8.55B USD, then reduced its request to $3B USD to try to get it cleared faster.  The automaker has already committed to projects expecting to get the loan.  Yet, no loan has arrived, even as its profitable peers Ford and GM have seen their requests fulfilled.

Meanwhile some small businesses are giving up.  Illinois auto supplier Tenneco Inc. was told after an initial application that it would get $24M USD to conduct research into fuel-efficient parts at its engineering research center in Grass Lake, Michigan and to produce the parts at its Marshall, Michigan plant.  The loan process, though, fell through and rather than try to re-request the money the company abandoned hope of federal funding and went off searching for private funding.

And a second crisis is looming.  The DOE says that the loan program is more expensive than previously expected, so they will likely only be able to give out around $18B USD in total loans, versus the expected $25B USD.

Anyone familiar with the incredible success of China's ever expanding high-speed rail program realizes that government funding can be the key to high tech industrial success, if properly applied.  But the U.S. government thus far is showing itself to be an inefficient machine when it comes to promoting high technology in the automotive industry.  As the result, business leaders and members of Congress warn our nation may fall behind its foreign competitors.





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