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DOE announces conditional commitment for $259M loan to Alcoa for automotive aluminum production

The US Department of Energy (DOE) announced a conditional commitment for a $259-million loan to Alcoa Inc. If finalized, the loan would support the company’s Alcoa, Tennessee, manufacturing facility (Tennessee Operations), where the company will produce high-strength aluminum for North American automakers looking to lightweight their vehicles. (Earlier post.)

This conditional commitment is the first issued by the Department under the Advanced Technology Vehicles Manufacturing (ATVM) loan program since Secretary Moniz announced a number of improvements to the program last year, and is the first step toward issuing a final loan to Alcoa.

Alcoa’s Tennessee Operations originally began operations in 1913 as an aluminum smelter (using the local hydropower). A Global Packaging plant opened on the site in 1942; the smelter shut down in 2012. Tennessee Operations currently is the world’s largest producer of rolled aluminum can sheet (which is transformed into beverage cans). On 2 May 2013, Alcoa announced a $275-million expansion at Tennessee Operations to meet the growing demand for aluminum sheet for automotive production.

The project is converting some of the plant’s can sheet capacity to high-strength automotive aluminum capacity, as well as installing incremental automotive capacity. When completed, the plant will be a key supplier to both the packaging and automotive markets. Much of the volume for the automotive expansion is already secured under long-term supply agreements.

The project will incorporate, through Alcoa’s supply chain, the proprietary “Alcoa 951” pre-treatment bonding technology (earlier post) which enables adhesive bonding of automotive structures and is facilitating more cost-effective, mass production of aluminum-intensive vehicles (AIVs). Alcoa is licensing the technology to the industry at the request of auto OEMs.

This type of high-strength aluminum helps boost fuel economy by reducing vehicle weight while still maintaining safety. High volume models, such as the Ford F-150, are using aluminum intensive designs to boost fuel economy performance through lightweighting.

Alcoa estimates that its expanded production is expected to create an additional 200 permanent full-time jobs, in addition to 400 jobs at the peak of construction.

In 2014, Alcoa completed a $300-million expansion at its Davenport, Iowa facility dedicated to supplying aluminum sheet products to the automotive industry. (Earlier post.)

The conditional commitment is an important step toward issuing the loan, and the Department will continue to monitor the project’s development and work to reach a final agreement.

The ATVM loan program enables the domestic manufacturing of advanced technology vehicles and components. To date, the Department’s Loan Programs Office (LPO) has issued more than $8 billion in direct loans which supported the production of more than 9 million cars and approximately 35,000 direct jobs across eight states.

Overall, the LPO supports a large, diverse portfolio of more than $30 billion in loans, loan guarantees, and commitments, supporting more than 30 closed and committed projects. The projects that LPO has supported include more than a dozen new or retooled auto manufacturing plants across the country, one of the world’s largest wind farms, and several of the world’s largest solar generation and thermal energy storage systems.

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