UPDATE 3-US hopes Chrysler will qualify for energy loans-Chu

Tue May 17, 2011 5:55pm EDT

* Premature to say if Chrysler application meets standards

* Chrysler's also refinancing government bailout loans (Adds Chu on electric cars, LaHood at Nissan in Tennessee)

By John Crawley

WHITE MARSH, Md., May 17 (Reuters) - The Obama administration hopes Chrysler Group LLC will qualify for government loans to help make more fuel-efficient vehicles, but it still has hurdles to clear with banks and investors.

Energy Secretary Steven Chu told Reuters on Tuesday it was premature to say if Chrysler's application had met the criteria for aid from his agency under the loan program.

Chrysler took a bailout at the height of the financial crisis in 2009 and is now in the process of refinancing about $7.5 billion in loans owed to the U.S. Treasury and Canada.

There will be more clarity on whether Chrysler will get a loan from the U.S. Department of Energy once refinancing is complete, Chu said at an event outside Baltimore where General Motors Co (GM.N) broke ground on an electric motor facility.

"We'll see how it goes," Chu said. "They will decide what they want to do."

Chrysler applied for $3.5 billion in loans under the $25 billion financing program established by Congress in 2007 to help U.S. and other automakers retool old factories and make more fuel-efficient vehicles.

Applicants must make, or make parts for, advanced technology vehicles like gasoline/electric hybrids, plug-in electric cars or vehicles that use the latest drivetrain or fuel systems designed to save gasoline.

Applicants must also be financially viable.

Chief Executive Sergio Marchionne said in April the loans would allow Chrysler to transform its truck-heavy lineup.

Marchionne also said he expected approval for the DOE loans to come "relatively quickly" after Fiat bought a 16 percent stake in the U.S. automaker.

The cash infusion announced in April should provide "additional comfort" to the agency regarding Chrysler's financial stability, he said.

Ford Motor Co (F.N) and Japan's Nissan Motor Co Ltd (7201.T) have received $5.9 billion and $1.6 billion in loans respectively.

Ford, among other things, is using the money to convert truck plants to car production. Nissan's loans are helping to produce its Leaf electric car.

GM, which received a $50 billion bailout in 2009, withdrew its energy loan application earlier this year after bolstering its finances with an initial public offering in November.

The Treasury owns about a third of GM and less than 10 percent of Chrysler, which is operated by Italy's Fiat SpA (FIA.MI), as a result of bailouts under the Troubled Asset Relief Program (TARP).

GM said on Tuesday its electric motor plant adjacent to its sprawling transmission facility in White Marsh, Maryland, will make components for vehicle electrification when the plant opens in 2013. GM's signature "green" vehicle is the mainly electric plug-in Volt sedan.

U.S. Transportation Secretary Ray LaHood on Tuesday visited Franklin, Tennessee, site where Nissan is building a plant to make lithium-ion batteries for the Leaf.

The Obama administration wants to make the United States a center of battery development to power the next generation of hybrids and electric vehicles, which currently comprise a small fraction of U.S. vehicle sales.

The government has spent $2.4 billion so far on the battery initiative, which Chu said was a race to see which countries and companies will get there first to supply a worldwide market.

"Like it or not, oil prices go up and they go down, but in the long term, given the rising demand of transportation fuels around the world, it will be going up. You will want electric vehicles," Chu said. "It is a very big deal."

The Obama administration is considering a standard that would force automakers to double the average fuel efficiency of their fleet by 2025 to 62 miles per gallon, which proponents say would hasten consumer demand for electric cars.

The administration says it is on track to deliver a new fuel efficiency proposal this fall. (Reporting by John Crawley with additional reporting by Deepa Seetharaman in Detroit; Editing by Gunna Dickson, Gerald E. McCormick and Tim Dobbyn)

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