U.S.-Backed Vanmaker Wins What Chrysler Calls Monopoly

A startup automaker financed by the U.S. government won a regulatory decision that Chrysler Group LLC said will give its competitor a monopoly on selling wheelchair-accessible minivans to transit agencies.

The U.S. Federal Transit Administration’s decision will require local providers of transit services for the disabled to buy vans from Vehicle Production Group LLC unless they present a compelling reason to buy from another producer.

The agency’s ruling reversed a 2010 order waiving so-called Buy America rules for transit agencies that get U.S. funds.

“It is great news for us,” VPG Chief Executive Officer John Walsh said in an interview. “Obviously we’re pretty excited.”

The agency in 2010 ruled no U.S. company met the Buy America requirement that vehicles must be assembled domestically from mostly U.S.-made parts. VPG, based in Allen Park, Michigan, sought a reversal in August as it started producing wheelchair vans selling for about $40,000 at an AM General LLC plant in Indiana that was used to produce General Motors Co. (GM) Hummers, a brand that company shed.

The decision will help VPG, which also makes other vehicles, gain sales next year as the decision was effective immediately, Walsh said. VPG produced about 2,500 vehicles this year and expects that to increase to about 6,000 in 2013, he said.

U.S. Loan

VPG won a $50 million loan in March 2011 from the U.S. Energy Department under an alternative-vehicle development program that’s also backed Ford Motor Co. (F), Nissan Motor Co., Tesla Motors Inc. (TSLA) and Fisker Automotive Inc. The program was criticized during the U.S. presidential campaign by Republican challenger Mitt Romney.

About 25 percent of vehicles VPG produce are powered by natural gas, Walsh said.

VPG “just finished” drawing down its Energy Department loan balance and has begun repayment, he said. The company’s loan was the smallest and last in the vehicle loan program; the largest was Ford’s $5.9 billion.

VPG’s petition received more than 830 comments, pitting Ford Motor Co., auto-industry unions, several members of Congress and other supporters of Buy America rules against Chrysler, Thor Industries Inc. (THO)’s ElDorado National unit, closely held Braun Corp. and state and local transit agencies. Thor and Braun buy vans produced in Canada by Chrysler, import them to the U.S. and make them wheelchair-accessible.

Ford, Chrysler

The transit agency dismissed Chrysler’s comments that reversing the waiver would give VPG a monopoly and cause prices to rise. “FTA notes that the current waiver has served to the near-exclusive benefit of Chrysler since 2010,” the agency said in a Dec. 3 Federal Register notice.

VPG will compete against Ford, which makes raised-roof vans in the U.S., and against about 20 other companies that make small buses or vans, Walsh said.

“If there was any type of monopoly, it really was for Chrysler for the past two years,” he said. “They took the bailout and they moved that plant from St. Louis to Canada, and it just didn’t sit right.”

“Notwithstanding this decision, Chrysler Group does not believe the MV-1 vehicle is a good substitute for Chrysler Group-manufactured minivans, modified through our established vendors, in serving the needs of disabled customers,” Mike Palese, a spokesman for the company based in Auburn Hills, Michigan, said in an e-mail. “The company will continue to work with our manufacturing partners to ensure disabled customers can continue to take advantage of the outstanding design and technology of Chrysler Group-manufactured minivans.”

About 12,000 small buses and vans are bought with U.S. funds by transit agencies each year, Walsh has said.

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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