No DOE Loans For GM, Chrysler

It wasn't clear how the government's rejection of GM and Chrysler's "Viability Plans" would effect the seperate requests for funding under the Department of Energy loan guarantee program. Well, now we know: the answer is no.

 The legislation that created the loan guarantee program was created as a seperate program before the GM and Chrysler bailouts and before the financial sector crisis that began in September. No matter; the text of the original bill specifies that the companies receiving the money must be "financially viable".

The government has already determined that the companies were not viable before, so that settles this matter. GM had requested $10.3 billion and Chrysler had requested $6 billion. Given that Ford didn't take of the bailout money, they still qualify for the loan money, of which they have requested $11 billion.

My opinion is that, for the time being this situation makes a LOT more sense. Until GM and Chrysler get everything sorted out, other companies that are viable and depend on these loans to move forward (like Tesla) should be getting the funds. It should be used to help diversify things and to start some innovation in American small companies. Then, once they get on their feet and prove themselves to be viable, they can get investment, perhaps under a second program of this type.

For instance battery supplier A123 Systems is seeking $1.84 billion under the program. A total of $44.6 billion has been requested, including the amounts from GM and Chrysler. That amounts to around $28 billion left after their requests are taken out, leaving most requests able to be fulfilled.

The Department of Energy expects to be dispersed within the next few weeks. The companies receiving money will get a big boost from the investment by investors and I'm sure on the stock market if they are publicly traded. The loans will be of particular importance to Tesla. I expect they'll get a lot more orders for the Model S once the money is announced. It would be a shocker their requests got turned down.

Solar company Solyndra, Inc of Fremont, California has already got a $535 million guarantee to build a production factory. It's not clear if that guarantee is under this program or under the recently passed stimulus package. It's clear though that a lot of action in alternative fuels is being seen due to government encouragement and investment and that is welcome news.