After a four-year lull, the Department of Energy’s Advanced Technology Vehicles Manufacturing (ATVM) program is finally making another loan—$259 million to Alcoa, helping expand an existing plant in Tennessee to produce a greater volume of high-strength aluminum panels for cars. It’s a conditional award, not finalized.
ATVM, which started out with $25 billion as a Bush-era program, has a checkered past. It picked winners (Tesla Motors) and losers (bankrupt companies Fisker Automotive and Vehicle Production Group, which made wheelchair accessible vans). The big uproar over the government’s funding of defunct solar panel maker Solyndra, as well as ATVM’s own duds, acted to make the program really gun-shy about firing off another loan.
“We’re open for business again,” Peter Davidson, executive director of the DOE loan programs office, told me. He added that many would-be applicants thought that ATVM was a stimulus program, and that it ended in 2011. “They thought we were shut down,” he said.
Not so, and they’re celebrating in Tennessee right now. “This is good news for Alcoa and Tennessee,” said Senator Lamar Alexander (R-TN). Indeed it is, and I’m a big supporter of aluminum as a way to reduce weight in cars. Ford made a big bet on the lightweight metal in giving the new F-150 an all-aluminum body, and Cadillac is following suit with the CT6 luxury car it’s introducing in New York next week—65 percent of its structure is aluminum. Like carbon fiber, it’s strong but light.
My only caveat about this award is that it’s a pretty safe one. Alcoa isn’t going to go bust and embarrass the DOE, but I do have to ask if this major player (with 59,000 employees in 30 countries) wouldn’t invest in updating its Tennessee plant without the federal government’s assistance. Ironically, many of the promising start-ups that could have been funded by ATVM--Bright Automotive comes to mind--are now out of business, in part because they weren't funded by the government's program the first time around.
Making aluminum is an energy-intensive process, which is why Alcoa and others make it in Iceland (which has an abundance of geothermal and hydroelectric power). But the U.S., with its very low natural gas prices, is now also a really hospitable place to smelt the stuff. And aluminum demand, not only from the auto sector, is sure to grow. Ford, for instance, is adding aluminum to its SuperDuty pickups, as well as the F-150.
Alcoa, based in Pittsburgh, has already invested $670 million to expand capacity, and that includes $300 million at its Davenport Works plant in Iowa to help meet the aluminum demand for the F-150.
And Alcoa was already putting $300 million into Alcoa, Tennessee, where it’s making that automotive-grade aluminum sheet. That plant has been there since 1914, covers 125 acres, and has 923 employees. Some 200 more workers (and 500 construction jobs) would be added if the loan goes through. Alcoa’s also doing a joint venture in Saudi Arabia to supply the auto industry.
Alcoa closes plants, too, including one in Badin, North Carolina that shut down in 2010. The closing touched off a local battle over who should have control over the hydroelectric resources that Alcoa developed on the site.
The DOE told me to ask Alcoa about what it might or might not do without a loan. So I did ask the company. Lori Lecker, a spokeswoman for an Alcoa division that supports the auto industry, didn’t answer the question directly, but she said: “As an innovator in light-weighting solutions for vehicles, Alcoa continues to invest in new technologies to make cars and trucks safe and fuel-efficient. The savings through the Department of Energy loan program allows us to have more options as we grow this part of our portfolio—and validates that our technology supports fuel efficiency standards.”
Davidson also comments in general terms. “The U.S. auto industry is growing and creating opportunities for more manufacturers to expand,” he said. “We’ve been very pleased with the industry’s response, particularly with regard to light-weighting, and anticipate making additional loans to help manufacture fuel-saving vehicles and components here in the U.S.”
Aluminum and high-strength steel, by the way, are helping the auto industry to so far stay on track to meet federal greenhouse gas commitments. According to the EPA, carmakers overall are 12 grams per mile (or 1.4 mpg) better than they needed to be in the 2013 model year. The average combined fuel economy for 2013 cars was 24.1 mpg, a 0.5 mpg improvement over 2012.