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Chrysler Abandons Quest For Energy Dept Low-Interest Loans

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Sergio Marchionne

Sergio Marchionne

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The U.S. Department of Energy hasn't made any new loans under its Advanced Technology Vehicle Program in well over a year.  At its current rate, it may never do so.

The latest company to walk away from applications for low-interest loans from the $25 billion DoE program is Chrysler.

This afternoon, Detroit News reporter David Shepardson was told by three separate sources that Chrysler will abandon its applications and fund development work internally.

Chrysler subsequently confirmed its withdrawal in a brief news release, saying it remained "confident in its strategy to bring competitive, fuel-efficient vehicles and technologies to market on schedule."

It also said, "This decision will not impact Chrysler's ability to achieve its previously announced business plan targets."

Chrysler had initially applied for more than $8 billion of loans in late 2008, before its bankruptcy and subsequent partnership with Fiat, which now owns a controlling stake in the third largest U.S. carmaker.

Last year, Chrysler said it was looking for $3.5 billion in loans, and more recently, an amount of $2 billion had been discussed.

Energy Secretary Steven Chu said in May 2011 he hoped Chrysler would be approved for the loans, and CEO Sergio Marchionne has said the loans were vital to the company, to enable it to cut financing costs.

But with a gradually improving economy, four profitable quarters of financial results from the company, and a well received unveiling of its 2013 Dodge Dart compact sedan at last month's Detroit Auto Show, Chrysler may now have the ability to raise funds at a competitive price without the hassles of DoE involvement and oversight.

General Motors, which also went through a 2009 bankruptcy and restructuring, withdrew its own DoE loan applications in January 2011.

Fiat and Chrysler logos

Fiat and Chrysler logos

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Over the last year, the DoE loan program has become increasingly enmeshed in partisan politics.

The bankruptcy of solar-panel maker Solyndra--recipient of low-interest loans under a different DoE program--added fuel to the fire.

Last month, the DoE froze further loan disbursements to startup car maker Fisker Automotive after that company failed to meet certain deadlines and milestones relating to the timing and production volumes of its 2012 Fisker Karma extended-range electric luxury sedan.

And Fisker wasn't helped by a 20-mpg EPA rating when running in range-extending mode.

As Detroit News reporter David Shepardson tweeted, "Chrysler's withdrawal ends a potential political headache for the Obama administration, which has been reluctant to approve new auto loans."

The loan program provides funds for retooling of existing manufacturing facilities to build vehicles with fuel efficiency that's at least 25 percent better than today's vehicles.

In June 2009, Energy Secretary Steven Chu awarded a total of $8 billion in loans to Ford, Nissan, and Tesla. Three months later, the DoE granted Fisker Automotive $529 million.

Here are the details of the loans made to those four automakers:

2011 Ford F-150 EcoBoost rear view - Drive Tour 2011

2011 Ford F-150 EcoBoost rear view - Drive Tour 2011

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FORD [NYSE:F]

  • Amount: $5.9 billion
  • When: June 2009
  • Work Funded: Plant retooling in five states to build 13 models with electric, hybrid, or more efficient gasoline powertrains, including Ford'sEcoBoost turbocharged gasoline direct-injection engines

NISSAN [NSDQ:NSANY]

  • Amount: $1.6 billion (Nissan only used $1.4 billion in the end)
  • When: June 2009
  • Work Funded: Retooling of assembly plant in Smyrna, Tennessee, to build Nissan Leaf electric cars, and creation of lithium-ion cell fabrication facility

TESLA MOTORS [NSDQ:TSLA]

  • Amount: $465 million
  • When: June 2009
  • Work Funded: Development, engineering and manufacturing of the 2012 Tesla Model S all-electric sport sedan, later located in the GM-Toyota plant in Fremont, California, along with battery-pack assembly facilities

2012 Fisker Karma EcoSport

2012 Fisker Karma EcoSport

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FISKER AUTOMOTIVE [privately held]

  • Amount: $529 million
  • When: September 2009
  • Work Funded: $169 million for engineering integration work on the Karma; $360 million for development of a mid-size extended-range electric vehicle, to be built in a former GM plant in Wilmington, Delaware

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