November 3, 2009

The U.S. government has pumped more than $100 billion into Detroit over the past year to keep automakers General Motors and Chrysler alive. But some of the sector’s remaining capitalists are having a hard time stomaching a $25 billion Department of Energy loan program intended to spark new developments in electric cars. 

Start-ups Fisker Automotive and Tesla Motors have won about $1 billion in combined funding, while longtime players Ford and Nissan have received substantially larger loans from Washington to work on vehicle electrification — a technology the White House and many in the industry hope will reduce the United States’ dependence on imported oil and lower emissions of carbon dioxide, a leading greenhouse gas. 

Funneling federal money to new entrants to the automaking world does not sit right with Tim Leuliette, chief executive of parts supplier Dura Automotive. 

“If there’s a real market for electric vehicles, the OEMs will do it,” Leuliette said, using industry jargon for automakers. “We don’t need to have people who have never built a car in their life take $1 billion of our tax money and say ‘I can do it too.'” 

Government funding muddles market signals, Leuliette argued at the Reuters Autos Summit in Detroit.

“When government writes a check, it says the smart money investors are hesitant to fund it,” Leuliette said. “When markets say it’s now wise enough … there’s more than enough money.” 

For his part, the founder of Fisker Automotive — which aims to build plug-in hybrid cars at a former GM plant in Wilmington, Delaware — said government funding is a logical way to kick start a technology that private U.S. companies have been slow to focus on. 

“Do we just sit and wait for the Chinese and the Japanese or Europeans to develop this and then we join later? Or do we actually this time around, try to take the lead?” said Henrik Fisker, whose plug-in hybrids would be able to travel for short distances on just the electricity stored in their batteries, which can be charged off the electric grid. 

“This is a moment in time, we cannot let this pass. We already let the hybrid pass – Toyota in the consumer’s mind, invented the hybrid and owns the hybrid – the average consumer doesn’t know that GM has more hybrids than Toyota,” Fisker said. “If an American company comes first with a plug-in hybrid, and we will be followed closely by the Chevy Volt in another segment, I think that is where America then has a chance in the consumer’s mind to take the lead, and not only in the U.S., but worldwide.”

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