WASHINGTON -- Consider this parable of corporate politics.
A major auto company creates a $25 billion fund to invest in high-risk, high-reward technology ventures. A few years later the portfolio is performing well, but a couple of ventures go bust. A band of activist shareholders calls for killing the fund.
Its managers are understandably worried. The fund gives them influence. In their eyes, it could change the world. So they will do whatever they can to keep it alive.
This dynamic, familiar to anyone who has struggled within the silos of corporate power, helps explain why the U.S. Department of Energy is repurposing the $25 billion Advanced Technology Vehicles Manufacturing Loan Program, which Congress created in 2007 to get more efficient cars onto U.S. roads.
Energy Secretary Ernest Moniz announced April 2 that the Energy Department is taking steps to make the program more attractive to suppliers, not just automakers. Moniz signaled that he wants to lend money for projects such as efficient powertrains or lightweight aluminum.
"People have been very appreciative," Peter Davidson, executive director of the Energy Department's Loan Programs Office, told Automotive News. "They didn't seem to realize that we were still open for business. Now they know: We are open for business."
It was a nice gesture, but it also showed that the Energy Department is feeling heat behind the scenes. Six days after Moniz's announcement, the U.S. Government Accountability Office put the Advanced Technology Vehicles Manufacturing Loan Program on an annual list of programs that Congress may want to defund.
The reason: Despite the Energy Department's protestations, the program didn't look open for business.
During the economic downturn, it was very much open, lending more than $8 billion to companies such as Ford, Nissan and Tesla when private capital was scarce. The department still has authority to lend $16.6 billion, but it hasn't approved a loan since March 2011.
Interest rates are low and capital is readily available, so automakers do not need government cash. What's more, they are wary of being associated with loan recipient Fisker Automotive, which stuck taxpayers with $139 million in unpaid debt when it went bankrupt.
GAO, a nonpartisan watchdog that holds substantial influence in Washington, recognized that the Energy Department is making changes to its program, and is hoping for more applications in 2014. But the report came to a blunt conclusion: "The Energy Department has not further demonstrated a demand for ATVM loans."
Government agencies know when a watchdog report is coming, because they get a chance to respond. In this case, the message was clear: Use it or lose it. Making entreaties to suppliers was a way for the Energy Department to protect its program from critics.
The fund will always face criticism from people who prefer a small government, the activist investors in my parable. Those groups, mostly allied with Republicans, seized on the watchdog report to argue their case on Capitol Hill.
"Close the Advanced Technology Vehicles Manufacturing Program," said the headline of a blog post from the libertarian Cato Institute. The group argued that taking back the $16 billion in loan authority would save taxpayers money and "reduce government interventions in the energy and automobile markets."
A gridlocked Congress probably won't eliminate a little-known program such as Advanced Technology Vehicles Manufacturing loans, especially when it has support from Democrats who see clean vehicles as crucial to curbing climate change. But political dynamics can change.
President Obama's aides could offer up the program as a sacrifice in budget negotiations. A future president could kill the program to save money on paper.
The auto industry hopes Advanced Technology Vehicles Manufacturing loans will be available years into the future, so automakers and suppliers will someday be able to get cheap financing when interest rates are high or capital is otherwise tight. For that to happen, it seems, suppliers may need to take the Energy Department's offer while it's on the table.
You can reach Gabe Nelson at email@example.com