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A stimulus-backed Department of Energy loan program that has not been tapped for four years, and was deemed unwanted two years ago by the Government Accountability Office, is suddenly ready and willing to dole out more taxpayer millions again – to a corporation that doesn’t need it.
In fact, Alcoa’s expansion project for which the funding is targeted – to produce special aluminum for automotive companies in Tennessee – has already been underway for 19 months and was first revealed almost two years ago.
DOE announced on Thursday that the renewed activity out of its Advanced Technology Vehicles Manufacturing program will deliver a $259 million loan to the multinational conglomerate. The excuse for the financing – considering that ATVM’s purpose was to support production of alternative energy-powered automobiles – is to produce “high-strength” aluminum for automakers “looking to lightweight their vehicles.” Yes, they used “lightweight” as a verb, and claimed the funding would create an additional 200 factory jobs and 400 construction jobs in the process.
“The Department’s ATVM loan program can play an important role in helping to finance expanded domestic manufacturing of fuel-efficient technologies that will support the next generation of advanced vehicles and protect the environment by reducing greenhouse gas emissions,” said DOE Secretary Ernest Moniz, in photo.
The amount being loaned represents pocket change for the corporation that had $23 billion in revenues in fiscal year 2013 and ended the year with $35.7 billion in assets. And the purpose is (or was) to expand “one of the most modern aluminum fabricating facilities in the world.” But the company long ago announced its groundbreaking for the facility – at a cost of $275 million – in an August 2013 press release, citing the 200 factory/400 construction jobs expansion. So the DOE loan covers pretty much the entire cost.
“The…expansion will convert some of the plant’s can sheet capacity to high-strength automotive aluminum capacity,” Alcoa announced, “as well as install incremental automotive capacity, making it a key supplier to both the packaging and automotive markets.”
So the project is happening without need for the DOE loan. In fact, demand is so high for Alcoa’s automotive aluminum that it’s the secondsuch expansion of one of its plants for that purpose. The first was a $300-million revamp of its Davenport, Iowa facility. According to the company, “much of the volume for the automotive expansions is secured under long-term supply agreements.” In other words, justification for the added capacity at the two plants is guaranteed by promises from auto manufacturers that their aluminum will be bought.
It’s pretty audacious that DOE and Secretary Moniz would try to extract credit for a project that was already two years into development and construction. But even if the agency’s role in business expansion and job creation was legitimate, it makes no sense. A $259 million “investment” for 200 factory jobs and 400 temporary construction jobs works out to high-six figures per job; if you count just the “permanent” jobs produced, the taxpayer backing comes out to $1.2 million per job.
Ironically, the DOE announcement about its financing for Alcoa comes 19 months (like the Tennessee groundbreaking) after the agency said it would renew efforts to find new loan recipients in an “active outreach campaign.” The effort had to be revitalized because the ATVM program was in a moribund state, in part because of a lot of bad publicity.
The program’s highest profile failure was Fisker Automotive, which went belly-up after receiving $193 million in stimulus support. Another that went bankrupt, Vehicle Production Group, received a $50 million loan that wasn’t repaid. Nissan and Ford Motor Company received billions of dollars to spur electric vehicle production, but none of their models have taken off and none would be sustainable with massive subsidies. Tesla Motors – the one alleged “success” story from the program – paid back its $465 million ATVM loan and has plenty of stock market fanatics, but is far from profitable and is largely surviving on hype and other subsidies.
Back in March 2013, DOE had trouble finding takers for the remaining $16.5 billion that had been allocated to the ATVM program. According to a report produced by the Government Accountability Office that reviewed DOE’s loan programs, those who might otherwise be interested in the financial help cited things like bureaucratic red tape, reporting requirements, uncertainty about credit subsidy costs, lengthy review times, and the expenditure of time and resources for an uncertain outcome as obstacles. A number of smaller companies had been strung along by government loan administrators, who allegedly gave impressions that financing would be forthcoming if certain conditions were met, but never came through. But what stood out most – especially in the ATVM loan program – was that many electric vehicle entrepreneurs were deterred by bad publicity surrounding previous loans.
So for the last few years the ATVM money has sat dormant at DOE. Now all of a sudden Alcoa is ready to accept a small sum that only seems to serve the purpose of helping the agency justify the continuation of the program. The announcement happened to come just a day following a hearing of the Senate Energy and Natural Resources Committee in which Sen. Lisa Murkowski criticized the program.
Rather than show the funding for alternative energy vehicle projects is needed, the Alcoa financing further demonstrates that DOE is mismanaging the money. The ATVM program should be shut down immediately.
[Originally published at NLPC]