Controversial Government Loan Program Seeks Shot At Redemption In Auto Industry

Cue up the partisan-politics pundits after today's announcement that a Department of Energy loan stimulus program - once the whipping boy for big-government critics from all corners - is back in business.

The DOE said its Advanced Technology Vehicle Manufacturing loan program, after a four-year reevaluation (really, four years?) of its raison d'etre, has a conditional agreement with aluminum producer Alcoa to loan the company $259 million to retool its Tennessee factory to make specialized aluminum sheets designed to be pressed and pounded into body panels for consumer vehicles. Aluminum is roughly 2.5 times lighter than steel and is rapidly being adopted by auto manufacturers for all manner of vehicle components that can benefit from aluminum's lightness and outstanding strength-to-weight ratio.

The Alcoa Tennessee plant also happens to currently make the aluminum sheet that eventually forms the body of the Ford Motor 2015 F-150 pickup truck, a vehicle considered radical for eschewing the conventional wisdom that pickups require "tough" steel bodywork. The F-150 has emerged as something of the poster child for the industry's accelerating rush to aluminum for body panels and other components to cut overall vehicle weight as stricter government fuel-economy regulations kick in beginning next year. One happy circumstance is that the aluminum-bodied F-150 has launched to almost universal acclaim and Ford dealers practically have resorted to hiring moonlighting air-traffic controllers to manage the F-150s flying out of the showrooms.

The ATVM program's selection of Alcoa for its reentry into the game looks like a safe gambit for credibility after some of its high-profile original miscues; ATVM 1.0 was funded with $25 billion in 2008 under the Bush Administration and proceeded to shovel out bucks like they were stoking the locomotive late for the driving of the Golden Spike.

Among winners like Tesla Motors , which received $465 million (and rather promptly paid it back), were suspect bets on Fisker Automotive, which got more than $190 million in ATVM loans and produced a limited run of high-priced plug-in hybrid sport sedans before going belly up and now-defunct Vehicle Production Group and its seemingly well-intentioned business plan to build specially designed wheelchair-accessible vans intended to be fueled by compressed natural gas. The government recovered only $8 million of its $50-million investment in VPG>

An ATVM success often overlooked is the $5.9 billion loaned to Ford Motor in 2009 just as the Great Recession

got underway. That backing helped keep Ford solvent and able to retool several manufacturing plants to build more fuel-efficient models. The funds surely helped Ford avoid the colossal taxpayer-backed bailouts ponied up for General Motors and then Chrysler Corporation (now FiatChrysler Automotive).

Originally - and perhaps rightly - accused by critics as a heavily-funded government arbiter of "winners" and "losers" in the private sector, the DOE's lengthy self-evaluation seems to have produced a more-realistic and libertarian brief: rather than favoring companies eager to produce fuel-efficient vehicles (and presumably profit from that endeavor), the ATVM is shifting more to industry suppliers who often are responsible for developing the fundamental advanced technologies that then can be purchased by several manufacturers and employed according to their individual business strategies. Auto industry suppliers large and small increasingly are responsible for the lion's share of content in nearly every auto company's vehicles.

The role of suppliers is the not-so-small nuance of automotive development and manufacturing ATVM 1.0 missed - and perhaps wouldn't have if the government had employed a few more folks with intimate knowledge of the auto sector. More than $16 billion remains in ATVM's kitty and probably everyone hopes it's deployed with moderately more discretion than the first time around.