Energy Dept. pulls plug on $730 million auto loan

The Energy Department (DOE) has decided against providing a Michigan company with a $730 million loan to support the manufacture of high-strength automotive steel.

The department last June gave Severstal Dearborn LLC — a subsidiary of Russian steel giant OAO Severstal — a conditional commitment for the loan to retool and expand facilities in Dearborn, Mich.

But a DOE spokesman said the department, after a “thorough review,” has decided against moving forward with the loan. “Nevertheless, the project does have merit and has already had some success in obtaining private financing. We hope that the company will remain committed to its investment in Michigan,” spokesman Damien LaVera said.

The planned loan had come under attack from several GOP lawmakers, including House Oversight and Government Reform Committee Chairman Darrell Issa (R-Calif.), and some of Severstal’s steel industry competitors. Sen. Dan Coats (R-Ind.) applauded the decision not to move forward.

“This announcement is a victory for taxpayers and steel manufacturers in Indiana,” he said in a statement. “The Severstal loan commitment never passed the sniff test, as multiple producers are already manufacturing this high strength steel without taxpayer financing.”

The rejection of the Severstal financing also comes amid wider GOP criticism of DOE loan and loan guarantee programs following the collapse of solar panel manufacturer Solyndra last year.

But LaVera said the decision not to move ahead with the Severstal loan was made on the merits of the specific case. “As we have consistently said, the additional due diligence the Department conducts after a conditional commitment is signed is an important part of the process and is vital to protecting the taxpayers,” he said.

“Because our review of loan terms continues after the conditional commitment is signed, not every project that receives a conditional commitment closes its loan,” LaVera said.

The company had sought financing under the Advanced Technology Vehicles Manufacturing program, which was established under a 2007 energy law that passed with bipartisan support and was signed by then-President George W. Bush.