Issa probes potential Energy Department loan to steel company

House Oversight and Government Reform Committee Chairman Darrell Issa (R-Calif.) is attacking a potential $730 million Energy Department loan to a company for manufacturing high-strength automotive steel in Michigan.

In a letter to Energy Secretary Steven Chu, Issa questioned whether Severstal North America — a subsidiary of Russian steel giant OAO Severstal — should receive public financing to retool and expand facilities in Dearborn, Mich.

He argued that Severstal was already moving ahead with production plans “with apparently no need for federal financing” and also questioned whether the project is even eligible under the requirements of the Advanced Technology Vehicle Manufacturing (ATVM) program.

Issa also noted the wealth and connections of Alexei Mordashov, CEO of the Russian parent company, who according to Forbes has a net worth of $18.5 billion. Issa argued the company could self-finance the project or find funding on the open market.

“Given the immense wealth and power of Severstal’s CEO and the fact that the corporation had already made significant investments in the project, it is surprising that DOE would choose Severstal for a loan meant to spark new businesses and technologies within the automotive industry,” he wrote in the Oct. 20 letter released Wednesday.

Issa is already probing DOE renewable-energy loan guarantees following the failure of the federally backed California solar-manufacturing company Solyndra, which collapsed several weeks ago despite receiving a $535 million DOE loan guarantee in 2009.

The Energy Department announced conditional approval of the Severstal loan in July, but has not given final approval. Energy Department spokesman Damien LaVera defended the potential financing in a news release Wednesday evening.

“Severstal’s application is for a project that would help make American car manufacturers more competitive as demand for lighter, more-fuel-efficient vehicles increases; strengthen the American steel industry; and support more than 2,500 construction jobs and over 260 permanent manufacturing jobs in Michigan,” he said.

“While it is important to note that the due diligence on the project is continuing, this project has received bipartisan support because producing the next generation of automotive advanced high-strength steel is vital to helping American workers remain competitive.”

The auto loan program was authorized in a 2007 energy law that passed with wide bipartisan support and was signed by then-President George W. Bush.

A bipartisan group of Michigan lawmakers in July 2010 wrote to Chu expressing support for loan applications submitted by Michigan-based automakers and component suppliers.

In their letter, they wrote that “maintaining and building America’s manufacturing base is at the heart of the ATVM program.”

Signers included Rep. Fred Upton (R-Mich.), who is now chairman of the House Energy and Commerce Committee, which is spearheading the GOP probe of the Solyndra financing.

But Issa is now questioning several aspects of the Severstal financing.

His letter to Chu questioned the need for expanded advanced high-strength steel production capacity in the U.S. market, arguing that the Severstal financing “would seem to be a waste of taxpayer funds ... when there is already more than enough production available for this material.”

Issa is asking Chu for an array of documents and information by 5 p.m., Nov. 3. Issa’s office released the letter following a Fox News interview and segment highlighting the congressman’s probe.

Severstal is defending its project in the wake of Issa’s new criticism. A spokeswoman told The Detroit News that the company met the requirements of the ATVM loan program during a two-year due-diligence process.

“The next-generation advanced high-strength steel technology we are putting in place with this project is … critical for advanced-technology vehicle manufacturers to meet the future fuel-efficiency goals,” spokeswoman Katya Pruett told the paper.