Automakers: Don't Count Federal Electric-Vehicle Loans Until You Get the Check

Last Updated Mar 29, 2010 9:30 AM EDT

If wishes were horses, a lot of start-up green vehicle companies would be sitting astride their mounts today. As we get closer to a flood of new car launches at the end of this year and early next, it has become apparent that some companies will make it and others won't. And some are tying big dreams to slender threads.

Aptera, which was supposed to have its futuristic battery car out this year, is definitely hurting for money right now (though the company says it has an important announcement to make about its future). Others are also badly in need of investment capital. And many are staking their future on Department of Energy loans that will ultimately be awarded only to a fraction of the applicants.

Both Fisker ($529 million) and Tesla ($465 million) have been the beneficiaries of federal largesse, as have all three of the American companies (plus Nissan). The fund for green vehicle technology is $25 billion, and there's still plenty of cash there (the first round was $8 billion). So hope springs eternal.

Some companies see the DOE gold as make-or-break for the business plan, and nowhere is this more apparent than with Carbon Motors, an Atlanta-based company that, since 2003, has been trying to launch America's first purpose-built police car. The company has been inching forward, but it took a big leap March 22 when it announced that it would buy 240,000 clean diesel engines (with 30 mpg fuel economy and low emissions) from BMW.

The German carmaker has been struggling to sell diesels in the U.S., so it could see the Carbon Motors agreement as a way to publicize its next-generation technology. Because Carbon's BMW order is contingent. The company's business plan appears to be built around its application for a $310 million DOE loan. Company co-founder Stacy Stephens, a former Dallas police officer, told me he's "extremely confident" that the loan will be approved.

DOE money is never a sure thing, but Carbon CEO William Santana Li is an optimist. The company has said it will locate its factory in economically challenged Connersville, Indiana, occupying the 1.8-million-square-foot factory whose 2007 closing by auto supplier Visteon was a huge blow to the city. Stephens told me Carbon will create 10,000 jobs in and around the plant, 1,550 of them direct employment and the rest at suppliers.

In January, Li sat down for a televised interview with the mayor of Connersville, who seemed equally eager to count the chickens before they were hatched. Good news from the DOE, Li said. We have been formally advised that our application (filed in August of last year) is "substantially complete."

From my perspective, that form letter from the DOE is essentially similar to the one high school students get from colleges informing them that their application is on file. It's not the same as the fat envelope that tells the kids where to go to register for classes. It doesn't mean they're in.

Li went on to talk about the "heartbreaking" letter he got from a Connersville resident looking for a job, and he said Carbon was going to go ahead and hold a "job fair" locally, getting a theoretical work force in place for the big day when the money arrives. Here's the video:

Li said that Carbon has 12,500 reservations from police forces for its E7 vehicle, but that in itself won't get cars rolling out the doors in Connersville. Getting a new car through crash testing and on the road to new owners is a very cash-intensive business, as many start-ups are finding.

I see two potential roadblocks to DOE funding for Carbon. The federal government (indeed, you and me as taxpayers) are already part owners of potential police car suppliers General Motors and Chrysler. (Ford, maker of the legendarily cop-friendly Crown Victoria) is on its own.) And clean diesel, especially from a non-U.S. company, may not be the kind of green vehicle technology the agency will offer priority support.

Another electric contender, Louisiania-based V-Vehicle, got turned down by the DOE earlier this month. In a remarkable burst of honesty, it then returned the $6.2 million in state money it had already received. Like Coda and Wheego, both DOE applicants, it offers electric cars built around a Chinese base. But the latter two Americanize the product by assembling them here and drawing on a plethora of U.S.-based suppliers. They too want that loan money, but have a Plan B (and private investment) that, they hope, will get them to market without government help. The same is true of Think, the Norwegian company that also plans to build cars in a hard-hit Indiana city.

The DOE won't comment on pending loan applicants, so we'll just have to see who gets the fat envelopes. And counting the money now is probably premature.