Coats questions DOE judgment on Severstal loan

2011-11-08T17:00:00Z 2012-01-10T11:14:45Z Coats questions DOE judgment on Severstal loanBy Bowdeya Tweh bowdeya.tweh@nwi.com, (219) 933-3316 nwitimes.com

Indiana Sen. Dan Coats is one of two legislators who want the Department of Energy to explain why it awarded a $730 million loan to a steelmaker to retool a facility producing steel products already on the market. 

Coats and Pennsylvania Sen. Pat Toomey, both Republicans, penned a letter to energy department's inspector general Monday calling for a formal review of the loan Severstal North America Inc. received under the Advanced Technology Vehicle Manufacturing Program.

The Department of Energy announced the conditional loan commitment in July. Severstal North America, which is a subsidiary of Russian steelmaker OAO Severstal, said it would use the funds to retool a Michigan plant to produce high-strength, lightweight steel products.

A number of companies, including ArcelorMittal and United States Steel Corp. in Northwest Indiana, make advanced high-strength steel products for the automobile industry and the pair questioned why the loan was awarded when the upgrades were already under way.

"Given the tremendous fiscal crisis that we find ourselves in today, it does not seem appropriate for the program to subsidize technologies that have already achieved commercial success through private sector means," the letter said.

A Severstal North America spokeswoman said via email Tuesday that the company is proud to develop the next generation of advanced high-strength steel technology that is high in demand and in short supply. The company also said it was involved in a nearly two-year due diligence process with the Department of Energy and has met every requirement for the federal loan.

The letter also said the loan may contribute to excess steel production capacity, even with more stringent vehicle fuel efficiency standards for automakers in the future. Excess capacity would then reduce the competitiveness of firms already in the market and mitigate the impact of job gains.

James Garraux, U.S. Steel general counsel and senior vice president for corporate affairs, said in a statement provided Tuesday it is shocking the "administration would be awarding an enormous, dirt-cheap loan like this to a Russian steel company at a time when American citizens are already shouldering the burden of trillions of dollars in national debt."

In addition to praising the senators seeking the inquiry, Garraux said taxpayer dollars shouldn't be used to "subsidize the modernization of facilities that Severstal knew were obsolete" after buying the Dearborn, Mich. plant in 2004.

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