There are still a lot of unanswered questions about the engineering costs that can be paid for with the federal funds to be dispatched to the auto industry via the U.S. Department of Energy's (DOE) Advanced Technology Vehicles Manufacturing Incentive Program (ATVMIP). The transition from the Bush to Obama administration only heightens the uncertainty as new DOE political appointees and program managers move into place.
The Bush DOE has received more than 70 applications for the $25 billion in low-interest loans to auto and component manufacturers for use in building and retooling factories and engineering integration in conjunction with advanced technology vehicles or their components. The 2007 Energy Independence and Security Act sets requirements that those vehicles must meet, either in terms of fuel efficiency or reduction of greenhouse gas emissions.
It is not clear how much of the $25 billion the DOE will commit initially to first-round applicants, who submitted proposals prior to Dec. 31. Theoretically, the agency is accepting applications in each of the first two quarters of 2009 and will be assessing them with the thought that any money left over after the first-round awards are made will be dispersed to second- and third-round applicants.
At two meetings in Washington, D.C., held by the DOE on Dec. 1 and 5, Bush administration officials in charge of defining loan program rules treaded lightly over important details, not the least of which related to what engineering integration costs could be paid for with ATVMIP loans. Andy Brown, Chief Technology Officer at Delphi Corp., asked for clarification about whether the funds could be used for "upfront development costs," such as validation and testing first of the materials and then of the component, all the way up to application. Carol Battershell, Senior Adviser to Lachlan Seward, Director of the ATVMIP, answered that the only "nuance" is that the engineering costs must be applied to a component that will actually go into an advanced vehicle. So DOE funds could not be used for engineering some theoretical component that a company hopes will be included in some advanced vehicle.
Dan Cohen, Assistant General Counsel for Legislation and Regulatory Law, said, "You need a chicken before you can get an egg, I guess."
Lyle Shuey, Vice President of Sales and Marketing for Bright Automotive, wondered whether DOE would provide engineering aid to a company in stages. For example, he implied that Bright might not make a manufacturing site selection until sometime in 2011 but would want to commence engineering integration for a new component in the first quarter of 2009. Could Bright make two applications, one for the engineering costs, the other for the facility construction costs? Matt McMillen, NEPA Compliance Officer for the DOE chief financial officer, answered by saying that if an applicant did not have a site already chosen, then the application would "not be considered ripe for analysis and, therefore, you would not be able to do NEPA [National Environmental Policy Act]. So it can get very complicated if you have phased actions."
Environmental assessments will play a big role in how fast the DOE releases money. When Congress created the loan program, it required the DOE to do a NEPA assessment for each application to ensure that air, water, and other emissions, or potential resource problems, would create "no significant impact."
One of the major unanswered questions is whether General Motors and Chrysler are eligible for DOE loans after they received $17.4 billion in loans from the Treasury Department's Troubled Asset Relief Program (TARP). GM has made two applications totaling $8 billion, according to spokesman Greg Martin. He acknowledges that it would not be too long a leap to imagine that engineering and manufacturing costs for the Chevrolet Volt are included in the GM request. Healy Baumgardner, a DOE spokeswoman, declined to answer a question about whether GM and Chrysler applications will be considered. Said GM's Martin, "There is no indication we won't be eligible for the DOE loans."
John Anderson, Director of Corporate Affairs at Delphi, thinks a number of issues are up in the air as management of the ATVMIP transfers to Obama administration political appointees. Delphi has submitted one application for three different projects in the areas of hybrid electric systems, fuel efficiency, and electric power steering systems. "DOE funds would be very helpful to Delphi in funding facility and capital costs and engineering integration costs," said Anderson.
So if GM and Chrysler do not qualify, that means it is more likely Delphi would get money, and up to the amount they requested, which Anderson would not disclose. Delphi might survive without loans, of course. But the ATVMIP money might make or break some of the companies, such as Bright Automotive, whose website claims it has designed a 100-mpg-plus plug-in electric vehicle that beats anything on anyone else's drawing board.