DOE Rejects Federal Loan For V-Vehicle
NEW ORLEANS (AP) — A startup automaker that planned to build a fuel-efficient vehicle in Louisiana and employ 1,400 workers lost its bid Wednesday for $321.1 million in federal loans considered vital in getting the company running.
V-Vehicle Co. said the federal Energy Department turned aside two loan applications — $241.2 million to revamp the idle Guide Corp. headlight plant in Monroe to manufacture the vehicle and $79.9 million to coordinate engineering with the company's 30 suppliers.
On Feb. 28, the San Diego, Calif.-based company and state economic development officials had expressed optimism that the loans would be approved.
"We were extremely surprised and disappointed by this decision," said V-Vehicle CEO Frank Varasano. "Our yearlong discussions with the Department of Energy had left us confident and optimistic that the loan applications would be approved."
V-Vehicle spokesman Joseph Fisher said he could not immediately provide the Energy Department's reasons for the rejection. Department officials did not immediately reply to a telephone message requesting comment Wednesday afternoon.
The state has committed $67 million in incentives for V-Vehicle. Details of the car are under wraps, but the company has said it will cost around $10,000, get about 40 miles to the gallon and seat four. The company said its prototype is currently undergoing testing, and V-Vehicle had hoped to have it in dealer showrooms by the end of 2011.
Officials had said the loan was vital to the company, which has raised $86.5 million in private investment. Varasano has refused to say what the company would do if the loans were rejected. On Wednesday, the company said its board would "assess the situation, evaluate funding and strategic alternatives and develop its plan for moving forward."
Varasano said the company will repay the state $6.2 million in incentives already issued. Voters in Ouachita Parish also approved a property tax increase to fund $12.5 million of a $15 million local incentive for V-Vehicle, which will be canceled.
In a statement, Gov. Bobby Jindal called the Energy Department decision "disappointing and surprising news." He said the state had been working with the company since last summer to get federal approval.
Jindal said the state would work with V-Vehicle on other options for completing the project.
State economic development head Stephen Moret said discussions with the Energy Department had proceeded to detailed loan terms "and the process appeared to be tracking toward a successful conclusion."
U.S. Sen. Mary Landrieu, D-La., said she would ask the Energy Department to explain why the loans were rejected and would "look into options to modify or reverse this decision."
V-Vehicle's plans were announced last summer as the General Motors Co. plant in Shreveport was being prepared for closure. A Chinese manufacturing company that proposed buying the Hummer brand planned to continue, at least temporarily, building Hummers at the plant, but the deal fell through and GM is shuttering the brand. GM continues to build pickup trucks at the plant, but plans to close it no later than mid-2012.
Terry Baugh, chairman of the Monroe Chamber of Commerce, said he was disappointed and did not know what prompted the Energy Department's decision. He said V-Vehicle "had the potential for transformational job growth in our community."
"Everybody I know and everybody I've spoken to who had some knowledge of how things were headed felt confident and felt good about the project," he said.
Baugh said he had not talked with V-Vehicle officials, "so we do not know what they may have as alternative plans."
Monroe Mayor James Mayo called the decision "a huge surprise for us. And a blow."
"We know that this is a huge project and we're not ready to step away from it at this point. It's still cloudy for us and important for us to see what V-Vehicle's options are. Once we know that we can make our determination," Mayo said.
AP writer Janet McConnaughey contributed to this report.