According to the Department of Energy, Tesla Motors will receive $465 million in loan money to advance electric vehicles, Ford Motor Company will receive $5.9 billion in loans to finance engineering advances, and Nissan will receive $1.6 billion in loan money to produce electric cars and battery packs at a manufacturing complex in Smyrna, Tennessee.
This is the type of federal involvement that is needed to jumpstart the modern auto industry (in addition to the renewable energy industry and the modernization of the electrical grid). GM and Chrysler did not qualify for the loans, since these companies “are prevented from receiving aid under terms of the program because they do not qualify as ‘financially viable’ companies.”
No doubt, early adopters such as Toyota have been winners with their fuel-efficient vehicles. However, companies such as GM even until fairly recently chided any attempts to market fuel-efficient vehicles such as hybrids, and apparently the American auto company was instrumental in killing its own electric car program in the 1990s, which seemed very promising at the time. However, it appears that Ford is becoming a clear winner due to GM and Chrysler’s woes, since the automaker “has gained U.S. retail market share in seven of the past eight months and said it is attracting customers from GM and Chrysler.” Furthermore, the downfall of two of the Big Three has no doubt left room for smaller auto startups, such as Tesla, to begin entering the market. From the Department of Energy:
Today, the Obama Administration announced $8 billion in conditional loan commitments for the development of innovative, advanced vehicle technologies that will create thousands of green jobs while helping reduce the nation’s dangerous dependence on foreign oil. The loan commitments announced today by the President include $5.9 billion for Ford Motor Company to transform factories across Illinois, Kentucky, Michigan, Missouri, and Ohio to produce 13 more fuel efficient models; $1.6 billion to Nissan North America, Inc. to retool their Smyrna, Tennessee factory to build advanced electric automobiles and to build an advanced battery manufacturing facility; and $465 million to Tesla Motors to manufacture electric drive trains and electric vehicles in California.
These are the first conditional loan commitments reached as part of the Department of Energy’s Advanced Technology Vehicles Manufacturing program. The Department plans to make additional loans under this program over the next several months to large and small auto manufacturers and parts suppliers up and down the production chain.
“We have an historic opportunity to help ensure that the next generation of fuel-efficient cars and trucks are made in America,” said President Obama. “These loans – and the additional support we will provide through the Section 136 program – will create good jobs and help the auto industry to meet and even exceed the tough fuel economy standards we’ve set, while helping us to regain our competitive edge in the world market.”
“By supporting key technologies and sound business plans, we can jumpstart the production of fuel efficient vehicles in America,” Energy Secretary Steven Chu said. “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.”
These commitments will help reduce the 140 billion gallons of gasoline Americans consume each year, lessening the nation’s dependence on the volatile world market for oil, and decreasing the cause of a fifth of the nation’s carbon emissions. The Obama Administration recently announced an agreement to raise passenger car fuel standards from 27.5 miles per gallon to a target of 35 miles per gallon (mpg) by 2016. While 35 mpg is ambitious, the Department of Energy’s auto loan program received more than a hundred applications for loans to help achieve greater fuel efficiency. The competition among advances in conventional engine technologies, next-generation biofuels, and transportation electrification holds the potential to increase US fuel efficiency dramatically over the next several years.
The Advanced Technology Vehicles Manufacturing Loan Program is an open and competitive process focusing on the best companies and best technologies in American manufacturing. First appropriated in the fall of 2008, the program will provide about $25 billion in loans to companies making cars and components in US factories that increase fuel economy at least 25 percent above 2005 fuel economy levels. The intense technical and financial review process is focused not on choosing a single technology over others, but is aimed at promoting multiple approaches for achieving a fuel efficient economy.
Applications for the loan program have included vehicles running on electricity, biofuels, and advanced combustion engines, and were submitted by both car and component makers, US automakers, US manufacturing subsidiaries of non-US-based companies, major US auto parts suppliers, and innovative startups.
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Taxpayers do not have unlimited funds — but the government continues to spend money like it’s their own pocket book.
When capitalism’s business cycle veers into discomfort (unemployment, slowing sales and borrowing, etc.) — the State (government) now suppresses recession with monetary policy (making money cheap and abundant) and fiscal policy (quantitative easing, injections of liquidity, stimulus programs, etc.) so nobody feels pain. But the problems are still there, just hidden for a time by the bailouts. They will continue to grow until another bailout is needed (e.g. Chrysler).
Capitalists and those that embrace the free market reject this narrow notion for many reasons. Chief among them is that fact that experience and progress is the byproduct as we surmount difficulty. The Marines say, pain is weakness leaving the body. These downturns are inefficiencies leaving the system. These loans will be used to prop up inefficient systems. Nobody truly learns. Nobody truly grows. Nobody progresses.
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You do not need to boycott car manufactures that accept bailouts. Capitalism thrives when you make a decision that fits you. You should find the car that you want — and that meet the criteria important to you. Car manufacturers that accept bailout money will be required to add inefficiencies to their business model and are at a disadvantage to produce the car that meets your needs the best. You should make car manufacturers and dealers compete for your business.
So if you are thinking about a car, check out this process on this blog: http://excarsalesman.typepad.com/
Obviously, capitalism and markets have their influence, but I believe it’s entirely unreasonable to let markets alone determine policy, or it’s unreasonable to wait for the markets to force change. It’s a dangerous and naïve policy.
These type of policies the federal government are promoting—fuel efficient cars and renewable energy—are long over due.
Furthermore, I disagree with this assessment: “These loans will be used to prop up inefficient systems.” Certainly, there are inefficiencies, but if they’re all inefficient, then we’re in big trouble. Additionally, despite the issue being portrayed otherwise, I believe a lot of taxpayer money goes to fund a lot of good projects and necessity for our country.
Personally, I believe the Iraq War was a big unnecessary cost, but a lot of taxpayers rallied around that initiative when GWB was selling it. I don’t even think we’ve started paying for the Iraq disaster yet.
In regards to this statement: “You should find the car that you want — and that meet the criteria important to you.”
A lot of people drive inefficient cars, thus wasting nonrenewable fossil fuels that will not be available to future generations, and if you believe in environmental degradation, pollution, and climate change, then at some point the federal government needs to get involved in order to remedy negative impacts that are the result of certain activity. Waiting for the markets, which can be manipulated, to remedy these issues is immoral.
The federal government has been, and needs to continue to be, a key player in promoting progress—states can’t always do it alone (although there are examples) and markets alone certainly can’t be a driver of progress.
I want to know what is going to happen to our electric grid that is already close to maximum power transfer and on the verge of its stability limits when we add all these electric cars. We keep pushing to go electric. I want to know where the power is going to come from. Wind? not even close to enough generation to meet a fraction of a percent needed to power all these new cars. So more generation will have to come from Reliable energy sources such as coal and Natural gas, so where is the benefit? You are still producing CO2.
So all this money that is being thrown to companies to go electric is a waste in my opinion because more money will have to be thrown to Utilities to upgrade the transmission system which is very expensive. Which the most of the cost will still have to come from utilities driving our electric rates higher…not to mention the tax payer has to pay for all the money the government is throwing out there. It seems like a vast spiraling effect into the next depression.
Money should be focused on improving fuel efficiency and people need to start sacrificing a little Horsepower for better economy. The big companies already make darn efficient gasoline engines, the consumer just wants all this extra power and luxery that adds weight and causes the fuel mileage to decrease. Its consumers that have driven this method of madness and lead to the dimiss of two of the big three American car companies, they kept building vehicles bigger and more powerful to try and meet the demand but gas mileage suffered. People didn’t care about gas mileage until it hit $4 a gallon. This is why vehicles 20 years ago had the same fuel mileage as cars today, but they had way less power. The engines themselves have gotten better and more efficient but people wanted more power.
With all the money that is being dealt out, soon the american dollar wont be worth a nickle and no one will be able to drive a car or afford to watch TV at night. I agree you have to spend money to make money, but too much is being spent and the people will have to pay it back at some point. We are already in massive debt and it is sky rocketing now. I fear the worse is yet to come!
I usually dont post in Blogs, but this particualr one was interesting enough. Thanks.
At least the auto world has some good news. And about the recession they are recovering from it.