Innovate or Be Overtaken, Energy Secretary Tells Automakers
U.S. automakers must “innovate” and make more fuel-efficient vehicles to capitalize on the assistance provided by President Barack Obama’s administration, Energy Secretary Steven Chu said.
“We’ve weathered the storm,” Chu said in a speech to the Detroit Economic Club today. “But we can’t rest. It’s a very competitive world out there. Our choice is very clear. We have to continue to innovate or we’ll be overtaken.”
Automakers selling cars in the U.S. are operating under the first mandated fuel-economy increases in more than two decades. The Obama administration, which Republican presidential candidate Mitt Romney has criticized for its auto bailout, is requiring fuel-economy increases of about 4 percent per year from 2012 to 2016.
Chu was among four Obama Cabinet-level officials to tour the North American International Auto Show in Detroit this week. Transportation Secretary Ray LaHood, Commerce Secretary John Bryson and Environmental Protection Agency Administrator Lisa Jackson discussed the administration’s role in the U.S. auto- industry recovery and investment in new vehicle technologies while at the Detroit event.
Chu defended his department’s loan-and-grant programs for automakers and suppliers to support development of electric vehicles. Lawmakers including Representative Darrell Issa, a California Republican, have questioned the agency’s loan programs following the failure of solar-panel maker Solyndra LLC, which received a $535 million loan guarantee.
Global Competition
“To compete in the global economy, it’s not only necessary for the United States to invent these technologies, we need to make them in the United States and sell our products worldwide,” Chu said.
Severstal OAO (CHMF), Russia’s second-largest steelmaker, didn’t receive the $730 million loan that won a conditional commitment in part because work on the project being backed was well underway, Chu said.
The Energy Department last week canceled the loan to Severstal, which was to be used to make high-strength steel for the auto industry.
“We shouldn’t really be giving loans to projects that are complete,” Chu said. “I hope it will continue. But we also have to weigh risks to the taxpayer.”
Chrysler, Tesla, Fisker
The agency is still talking with Chrysler Group LLC about its request for a loan, he said.
Chrysler Chief Executive Officer Sergio Marchionne said this week that regulators reduced the amount of financing being considered in their latest discussions with the company and that the Auburn Hills, Michigan-based company is weighing whether to keep pursuing the loan if it’s offered too little. Chrysler is seeking $3.5 billion.
“We hope to move forward,” Chu said today about the loan. “There are no promises of what will happen.”
The department is continuing to review applications as the White House reviews existing loans, Chu said. A123 Systems Inc. (AONE), a battery supplier, and Bright Automotive Inc., which plans to make electric vehicles for fleets, are among the applicants to the program.
Chu said he is “very hopeful” that auto-industry newcomers Fisker Automotive Inc. and Tesla Motors Inc. (TSLA) will be able to repay their loans. The two sports carmakers received about $1 billion between them.
Congress spent money to cover loan losses, Chu said.
“There are no guarantees in this world,” he said. “Any new company is risky. Having said that, they’re both very promising companies.”
To contact the reporter on this story: Angela Greiling Keane in Washington at agreilingkea@bloomberg.net;
To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net
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