Ford's 2013 C-Max hybrid is one of many new fuel-efficient offerings
It’s been three years since General Motors and Chrysler filed for bankruptcy, but with the political season in full swing, the two presidential candidates have put the auto industry bailouts back in the public eye, at least through the November election. Yet there’s only one Detroit automaker still in hock to U.S. taxpayers and – guess what? – it’s not GM or Chrysler.
Ford Motor owes the government $5.9 billion it borrowed in June 2009, the same month GM filed for bankruptcy. By Sept. 15, Ford needs to start paying that money back. In a government filing, the carmaker said $577 million is due within the next year, and the full amount must be paid off by June 15, 2022.
The Obama Administration, dreaming of a million electric cars on the road by 2015, loaned Ford the money to help it pay for development of hybrids and EVs, and to retool its factories to produce smaller, cleaner vehicles. While not characterized as a “bailout” by any means, let’s be honest: Ford’s loan – received at a critical time when other sources of financing weren’t available to automakers or their suppliers – no doubt helped the carmaker survive the industry crisis and contributed to its strong market position today, especially after the Obama Administration finalized tougher fuel economy rules this week.
Indeed, lest we forget: the feds in 2009 were handing out fistfuls of cash to bolster the auto industry, beyond the $64 billion used to bail out GM and Chrysler. Treasury staked another $18.7 billion on rescuing the companies’ auto lending affiliates (it still owns 74% of Ally, formerly known as GMAC). And the Energy Department doled out billions more to Ford and others to preserve auto-making jobs in the U.S. while steering the industry toward cleaner vehicles.
“We have an historic opportunity to help ensure that the next generation of fuel-efficient cars and trucks are made in America,” President Barack Obama said in a statement on June 23, 2009 announcing the loans to Ford and two others. Energy Secretary Steven Chu added: "By supporting key technologies and sound business plans, we can jumpstart the production of fuel efficient vehicles in America. 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."
No company was a bigger beneficiary of the DOE’s green car funding initiative than Ford. It received two-thirds of the $8.8 billion loaned under the department’s Advanced Technology Vehicle Manufacturing program. Congress appropriated $25 billion for that program in late 2008, during the waning days of the Bush Administration, around the same time the auto company CEOs were getting grilled on Capitol Hill.
The other ATVM recipients were Nissan ($1.6 billion), Tesla Motors ($465 million), Fisker Automotive ($529 million) and the Vehicle Production Group ($50 million), a start-up company promoting a handicapped-accessible van that runs on natural gas.
The DOE spent another $2.4 billion in federal stimulus money – most of it in Michigan – to provide matching grants to help companies build manufacturing facilities for advanced batteries and EV components. Unlike the ATVM loan program, those grants don’t have to be paid back.
So how did all that government aid for the auto industry work out? The results are mixed, at best. Chrysler, despite its long odds, is doing surprisingly well under Fiat ownership. Successful turnarounds at GM and Ford in the U.S. are weighed down by problems in Europe.
But car buyers, it seems, weren’t nearly as excited about electric vehicles as President Obama, who has since backed off his 2015 EV target. Most of the government-backed battery factories are operating well below their production capacity. Many recipients have shifted their focus away from electric vehicles toward grid storage opportunities. At least three recipients of federal funding collapsed or are struggling to stay afloat. Battery-maker A123 Systems, desperate for money, fell into the hands of a Chinese auto supplier. Another, Ener1, went bankrupt and is now owned by a Russian business tycoon.
If you’re keeping score (and you should be) here’s a rundown of how some of the government’s largest auto industry investments turned out:
GM: repaid $23.1 billion of the $49.5 billion it got from the U.S. Treasury, including all of its outstanding loans. But Treasury still owns 500 million shares, or 32%, of GM stock. To recoup its full investment, GM stock needs to hit $52.80 per share. It’s currently trading around $21. GM also received a $106 million matching grant to build a battery factory in Brownstown, MI, where it is assembling battery packs for the Chevrolet Volt plug-in car using cells imported from Korea.
Chrysler: repaid $9.2 billion, fulfilling its debt obligations to the U.S. and Canadian governments, and is now owned by Italian automaker Fiat (58.5%) and a health care trust for UAW retirees (41.5%). Overall, taxpayers lost $1.3 billion on the Chrysler bailout. In full recovery mode, Chrysler is currently the fastest-growing carmaker in the world.
Ford: used its $5.9 billion loan to convert two truck plants to small-car production and to develop more fuel-efficient vehicles like the Ford Focus EV and C-Max Energi plug-in hybrid, on sale this fall. Loan repayments start in September. Ford says it will spend $14 billion over the next seven years on advanced-technology vehicles.
Nissan: received a $1.4 billion loan to build a battery plant and modify an existing car factory in Tennessee to produce the electric Nissan Leaf (currently imported from Japan). Production of battery packs begins at the end of September; Leaf production follows in December. Though it has sold only 14,000 Leafs in the U.S. since December 2010, the company hasn’t backed off its U.S. sales target of 150,000 Leafs per year. A spokesman says Nissan will start repaying its loan after U.S. production begins.
Tesla: used its $465 million loan to build a battery plant and retool part of a former Toyota-GM factory to build the Model S, its second electric car. So far, only 100 of the cars have been built, well shy of its 2012 goal of 5,000. But the company says it’s on track. Loan repayments start in December. Tesla, which went public in July 2010, hopes to break even by 2013.
Fisker: received only $193 million of its $529 million DOE loan because of missed milestones. Its first plug-in hybrid, the $100,000 Karma built in Finland, suffered quality problems. Its next model, the Nina, and a new factory in Delaware, are on hold while the company sorts out its problems and seeks alternative funding sources.
Vehicle Production Group: used a $50 million DOE loan to add a compressed natural gas version of its MV-1 handicapped accessible van. So far, 300 of the 2,100 vans produced at a plant in Indiana run on CNG. As fleet sales rise, the start-up company expects at least half to be natural gas vehicles. VPG began repaying its loan late last year.
Johnson Controls: the leading lead-acid battery maker for autos used a $300 million DOE grant to build an advanced-battery cell plant in Michigan, and is shifting work here from Europe. It predicted slow acceptance of EVs, and is instead supplying batteries for other fuel-saving technologies, like microhybrids, which shut down when the vehicle stops. The plan was for 680 jobs at full capacity. Today, it has fewer than 100.
A123 Systems: drew $129 million of a $249 million DOE grant to build two battery plants in Michigan. But demand didn’t materialize, resulting in unused capacity. Meanwhile, A123 is replacing early batteries that had quality issues. Its resulting financial distress attracted China’s Wangxiang Group, which agreed to invest up to $450 million for an 80 percent stake in the company. A123, which employs 1200 people in the U.S., says it will continue to manufacture batteries in America, focusing on other markets like grid storage and hybrid buses and trucks.
Dow Kokam: the joint venture between Dow Chemical, a Korean battery maker and a French engineering company used its $161 million DOE grant to build an advanced-battery factory in Michigan. It started production in June, with 120 employees. With EV demand slower than expected, it is targeting other customers like delivery fleets, the Defense Department and tug boat operators.
LG Power: U.S. subsidiary of Korean battery maker used its $151 million DOE grant to build a battery plant in Michigan to supply cells for the Chevrolet Volt and others. But with demand lower than expected, the plant, which has 200 employees, hasn’t yet started production.
EnerDel: drew $55 million of its $118 million DOE grant to expand battery production in Indiana. An investment in Think, a Norwegian EV customer, turned sour, and EnerDel’s publicly traded parent, Ener1, filed for bankruptcy in January. Co-founder Boris Zingarevich, a Russian timber tycoon with ties to the Russian government, took control by investing another $86 million. That set off alarm bells in Washington because EnerDel’s batteries are used in some military applications. After exiting bankruptcy in March, EnerDel installed new management and moved its headquarters to Indiana. It currently supplies battery packs for the Volvo C30 electric car but is shifting its focus to making batteries for mass transit, grid storage and industrial uses.
