Ford, Nissan Motor and US electric vehicle start-up Tesla Motors have been granted low-cost US government loans to develop and build all-electric cars.
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Ford will receive almost US$5.9bn, Nissan $1.6bn and Tesla $465m in the first wave of financing from an energy department programme intended to offset the high costs automakers face meeting recently announced, sharply higher new federal fuel economy standards.
“By supporting key technologies and sound business plans, we can jump-start the production of fuel-efficient vehicles in America,” energy secretary Steven Chu was quoted by Reuters as saying at an event at Ford’s engineering and product development campus.
“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,” he said.
Chu’s department still has $17bn left in a fund first authorised by Congress in 2007 and said the agency would work quickly to approve further loans in the coming months to other automakers.
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By GlobalDataThe announcement last night of the first round of funding for Ford represented a win for the automaker, the United Auto Workers union and Michigan’s congressional delegation after an intense lobbying effort to get the long-stalled funding approved, Reuters noted.
One loan condition – a determination of viability – reportedly ruled out rivals Chrysler and General Motors because they have been forced through a federally funded bankruptcy process by the Obama administration.
Chrysler has emerged from Chapter 11 bankruptcy protection into an alliance with Fiat while GM is still going through the process with a so called ‘new GM’ expected to be in business by the end of summer.
Ford will receive loans to the end of 2011 to re-equip factories in Michigan, Ohio, Illinois, Kentucky and Missouri while some of the funding will cover the cost of converting two truck plants to make new small cars – Ford has previously confirmed it will build the latest European-designed Fiesta and Focus – including a battery-electric version of the latter– in North America from next year.
The loan is part of a $14bn investment Ford plans in advanced technology vehicles over the next seven years and it hopes most of that will come from government loans, the news agency said.
Chu said the Obama administration was already talking with Chrysler about new funding. Its new managing partner Fiat has pledged to build a new small car at one of Chrysler’s US plants.
GM, still in Chapter 11, has been having “technical” discussions with US officials on its planned projects that could qualify for funding, Chu said.
The ‘new GM’ will be majority owned by the U.S. Treasury.
“There is money there – I wouldn’t say set aside – but we are trying to stretch these dollars as far as we can,” Chu told Reuters when asked about funding for GM and Chrysler.
The Obama administration has previously committed almost $80bn of emergency taxpayer funding for the embattled US auto industry, including bankruptcy financing and other loans to GM and Chrysler, support for parts suppliers and an investment in auto finance company GMAC.
Ford is the only US automaker not to receive government bailout funding, opting for a strategy of cutting labour costs through negotiations with the UAW and reducing debt through market transactions.
In a statement, Ford president and CEO Alan Mulally said the funding would “help accelerate the development of advanced technologies for even better fuel efficiency and emissions”.
“Our partnership with the department of energy also will help retool our US plants more quickly to produce fuel efficient vehicles and help meet the new, rigorous fuel-economy requirements.
“It will give us a competitive advantage in that we are making the vehicles that people really want and value,” he added.
Reuters noted that Nissan qualified for the loans because its Smyrna, Tennessee plant is over 20 years old (it was opened initially to build light pickup trucks in 1983 thus avoiding a tax imposed on imported models).
Nissan North America said in a statement the loan would help it build pure electric vehicles in the US.
“This loan is an investment in America. It will help us put high-quality, affordable zero-emissions vehicles on our roads,” Dominique Thormann, senior vice president, administration and finance, said.
“This project will expand our Smyrna plant and that’s great economic news.”
Construction was scheduled to begin by the end of this year, after an environmental assessment, while production was planned to start in late 2012.
Nissan said it was committed “to being a leader in zero-emissions mobility” and would offer electric vehicles in the United States and Japan from next year.
The first vehicles for the US market would be built in Japan before production moves to Smyrna.
“Nissan is confident that the Smyrna employees have the skill and dedication to take on this critical role in Nissan’s future by launching a new form of transportation in the United States,” said Susan Brennan, vice president, in charge of manufacturing at Smyrna.
“This opens a new chapter in Nissan’s 26-year manufacturing history in America.”
A new battery plant would be built at the Smyrna facility and changes would be made to accommodate electric vehicle assembly.
When fully operational, the vehicle assembly plant will have capacity to build 150,000 units a year plus 200,000 batteries.
Nissan said its electric vehicle would “comfortably” seat five adults, drive on any American road or highway and have an initial range of 100 miles (160km) before recharging.
Tesla, based in San Carlos, California, will receive funds to bring its Model S battery-powered sedan to market, Reuters said. The start-up markets an electric sports car for over $100,000 but plans to slash the cost of its second model – a family sedan – by almost half.
Founder Elon Musk, who has said Tesla could become profitable by next month, called the federal funding a vote of confidence.
“In order to put to rest any question of business viability we thought it was a pretty important thing to aspire to,” he told the news agency. “Fortunately we’ve been able to achieve it.”
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