Could This Much-Maligned Government Loan Program Actually Work to Alcoa’s Benefit?http://www.fool.com/investing/general/2014/04/05/could-this-much-maligned-government-loan-program-a.aspx Matt DiLallo
April 5, 2014
In 2008 the Bush Administration created a $25 billion loan program that was designed to spur innovation within the auto industry. Around that time oil prices surged to more than $140 per barrel, making it clear that America needed to reduce its dependence on foreign oil. The Advanced Technology Vehicle Manufacturing loan program, or ATVM, was created to give automakers the funding to create more fuel efficient vehicles.
There was just one problem: The program found just four takers. Worse yet, one of the companies that received a loan went bankrupt. That said, the much-maligned program is set to improve with a new twist that will see it focus on suppliers. That twist could actually benefit a company like Alcoa (NYSE: AA).
Failed program or too early to tell?
Results like that caused some to call the program a failure. The companies that the program was intended to provide a boost for didn't received the full advantage of that boost. Not only that, but for the past few years the Department of Energy has been sitting on about $16 billion that should have been used to fuel the advancement of cleaner vehicle technology.
This is one reason why we're seeing Energy Secretary Ernest Moniz take the program in a new direction. The program could soon be opened up to suppliers that make advanced engines and powertrains, light-weight materials, advanced electronics, and fuel-efficient tires. Despite the fact that the loan problem has been met with mixed reviews that doesn't mean it can't still work when taken in a new direction.
How this might help Alcoa