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Program Implementation Is Under Way, but Enhanced Technical Oversight 
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United States Government Accountability Office: 
GAO: 

Report to the Subcommittee on Energy and Water Development, Committee 
on Appropriations, U.S. Senate: 

February 2011: 

Department of Energy: 

Advanced Technology Vehicle Loan Program Implementation Is Under Way, 
but Enhanced Technical Oversight and Performance Measures Are Needed: 

Department of Energy: 

GAO-11-145: 

GAO Highlights: 

Highlights of GAO-11-145, a report to the Subcommittee on Energy and 
Water Development, Committee on Appropriations, U.S. Senate. 

Why GAO Did This Study: 

In the Energy Independence and Security Act of 2007, Congress mandated 
higher vehicle fuel economy by model year 2020 and established the 
Advanced Technology Vehicles Manufacturing (ATVM) loan program in the 
Department of Energy (DOE). ATVM is to provide up to $25 billion in 
loans for more fuel-efficient vehicles and components. Congress also 
provided $7.5 billion to pay the required credit subsidy costs—the 
government’s estimated net long-term cost, in present value terms, of 
the loans. GAO was asked to review the ATVM program and agreed to (1) 
identify the steps DOE has taken to implement the program, (2) examine 
the program’s progress in awarding loans, (3) assess how the program 
is overseeing the loans, and (4) evaluate the extent to which DOE can 
assess progress toward meeting its goals. GAO analyzed loan documents 
and relevant laws and regulations and interviewed DOE and ATVM 
officials. 

What GAO Found: 

DOE has taken several steps to implement the ATVM program. First, it 
set three goals: increase the fuel economy of U.S. passenger vehicles 
as a whole, advance U.S. automotive technology, and protect taxpayers’ 
financial interests. DOE also set technical, financial, and 
environmental eligibility requirements. In addition, DOE established 
criteria for judging the technical and financial merits of applicants 
and projects deemed eligible, and policy factors to consider, such as 
a project’s potential for supporting jobs. DOE established procedures 
for ATVM staff, aided by experts from within and outside DOE, to score 
applicants and projects. Finally, the Credit Review Board, composed of 
senior DOE officials, uses the scores and other information to 
recommend loan decisions to the Secretary of Energy. 

The ATVM program has made $8.4 billion in loans that DOE expects to 
yield fuel economy improvements in the near term along with greater 
advances, through newer technologies, in years to come. Although the 
loans represent about a third of the $25 billion authorized by law, 
the program has used 44 percent of the $7.5 billion allocated to pay 
credit subsidy costs, which is more than was initially anticipated. 
These higher credit subsidy costs were, in part, a reflection of the 
risky financial situation of the automotive industry at the time the 
loans were made. As a result of the higher credit subsidy costs, the 
program may be unable to loan the full $25 billion allowed by statute. 

Although the ATVM program has set procedures for overseeing the 
financial and technical performance of borrowers and has begun 
oversight, it has not yet engaged engineering expertise needed for 
technical oversight. To oversee financial performance, staff review 
data submitted by borrowers on their financial health to identify 
challenges to repaying the loans. Staff also rely on outside auditors 
to confirm whether funds have been used for allowable expenses. To 
oversee technical performance, ATVM staff analyze information 
borrowers report on their technical progress and are to use outside 
engineering expertise to supplement their analysis. According to our 
review, projects needing additional technical oversight are under way 
and the ATVM staff lack the engineering expertise called for by the 
program’s procedures for adequately overseeing technical aspects of 
the projects. However, the program has not yet engaged such expertise. 
As a result, DOE cannot be adequately assured that the projects will 
be delivered as agreed. 

DOE has not developed sufficient performance measures that would 
enable it to fully assess the extent to which it has achieved its 
three program goals. For example, while DOE has a measure for 
assessing specifically the fuel economy gains for the vehicles 
produced under the program, the measure falls short of enabling 
assessment of progress in achieving DOE’s broad goal of improving the 
fuel economy of U.S. passenger vehicles as a whole because it does not 
account for, among other things, the fuel economy improvements 
manufacturers would have made, in the absence of the loans, to remain 
in compliance with increasingly strict federal fuel economy 
requirements. Principles of good governance call for performance 
measures tied to goals as a means of assessing the extent to which 
goals have been achieved. 

What GAO Recommends: 

To help ensure the effectiveness and accountability of the ATVM 
program, GAO recommends that DOE accelerate its efforts to engage the 
engineering expertise needed for effective technical oversight and 
develop sufficient, quantifiable performance measures for its program 
goals. DOE disagreed with GAO’s recommendations. GAO continues to 
believe DOE should engage expertise and reaffirms its recommendation 
that DOE develop sufficient performance measures. 

View [hyperlink, http://www.gao.gov/products/GAO-11-145] or key 
components. For more information, contact Frank Rusco at (202) 512-
3841 or ruscof@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

DOE Established Program Goals and Set Criteria for Applicant and 
Project Eligibility and Merit: 

The ATVM Program Has Awarded $8.4 Billion in Loans That Largely 
Enhance Conventional Vehicle Technology, but the Program May Be Unable 
to Lend the Full Authorized Amount: 

The ATVM Program Has Begun Overseeing Loans to Ensure Borrowers Comply 
with Financial and Technical Requirements but Has Not Engaged 
Engineering Expertise That Would Help Ensure That Projects Are 
Delivered as Agreed: 

DOE Lacks Performance Measures That Would Enable It to Fully Assess 
the Extent to Which the ATVM Program Has Achieved Its Goals: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Comments from the Department of Energy: 

Appendix III: GAO Contact and Staff Acknowledgments34: 

Table: 

Table 1: ATVM Loan Program Expectations of Jobs to Be Created or 
Preserved and Their Locations: 

Abbreviations: 

ATVM: Advanced Technology Vehicles Manufacturing: 

CAFE: corporate average fuel economy: 

CBO: Congressional Budget Office: 

DOE: Department of Energy: 

EERE: Office of Energy Efficiency and Renewable Energy: 

EISA: Energy Independence and Security Act: 

EPA: Environmental Protection Agency: 

GPRA: Government Performance and Results Act: 

mpg: miles per gallon: 

mpgge: miles per gallon of gasoline equivalent: 

NEPA: National Environmental Policy Act: 

NHTSA: National Highway Traffic Safety Administration: 

OMB: Office of Management and Budget: 

PSAT: Powertrain System Analysis Toolkit: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

February 28, 2011: 

The Honorable Dianne Feinstein: 
Chairman: 
The Honorable Lamar Alexander: 
Ranking Member: 
Subcommittee on Energy and Water Development: 
Committee on Appropriations: 
United States Senate: 

In recent years, concern about fluctuations in gasoline prices, along 
with worries about the environmental impact of petroleum use, such as 
increasing greenhouse gases, has prompted Congress to take steps aimed 
at making passenger vehicles in use in the United States more fuel-
efficient. In December 2007, Congress enacted the Energy Independence 
and Security Act (EISA), which made the nation's corporate average 
fuel economy (CAFE) standards for newly manufactured passenger 
vehicles more stringent by requiring significant increases in the fuel 
economy of the vehicles being sold in the United States by 2020. In 
addition, EISA authorized, but did not provide funding for, the 
Advanced Technology Vehicles Manufacturing (ATVM) loan program, to 
provide loans for projects to produce more fuel-efficient passenger 
vehicles and their components. [Footnote 1] The fiscal year 2009 
continuing resolution appropriated $7.5 billion from which the 
Department of Energy (DOE) is to pay the program's credit subsidy 
costs to support up to $25 billion in direct loans to manufacturers of 
passenger vehicles and their components. Credit subsidy costs are the 
estimated net long-term costs to the government, in present value 
terms, of loans over the entire period the loans are 
outstanding.[Footnote 2] In November 2008, DOE received and began to 
review the program's first loan applications. In December 2008, under 
the Troubled Asset Relief Program, the United States entered into loan 
agreements with two of the major U.S. automakers--Chrysler Group, LLC 
and General Motors Corporation--to provide $62 billion in 
restructuring loans. In addition, in May 2009 the Administration 
announced its National Fuel Efficiency Policy, which, to implement the 
increase in fuel economy required by EISA, called for higher CAFE 
standards for model years 2012 through 2016 for passenger cars and 
light-duty trucks--surpassing those EISA required by 2020. On April 1, 
2010, the National Highway Traffic Safety Administration (NHTSA) and 
the Environmental Protection Agency (EPA) made final the rule putting 
the more stringent CAFE standards in place[Footnote 3].: 

In this context, you asked us to review the ATVM loan program. 
Specifically, our objectives were to (1) identify the steps DOE has 
taken to implement the ATVM loan program, (2) examine the ATVM 
program's progress in awarding loans, (3) assess how the program is 
overseeing the loans, and (4) evaluate the extent to which DOE can 
assess its progress toward meeting program goals. To address these 
objectives, we analyzed relevant legislation and regulations, Office 
of Management and Budget (OMB) guidance on federal loan programs, our 
prior work on implementing the Government Performance and Results Act 
(GPRA),[Footnote 4] federal standards for internal control,[Footnote 
5] and DOE's program guidance. In addition, we analyzed information on 
applicants and documents DOE decision makers used to select borrowers. 
We also reviewed the loan agreements DOE had executed as of February 
24, 2011. We analyzed DOE data on the expected fuel economy of 
vehicles to be produced by projects funded by ATVM loans and compared 
them with data on future regulatory requirements; we examined 
documentation on DOE's model and its process for generating these 
data--we believe the data to be sufficiently reliable for our 
purposes. In addition, we interviewed relevant DOE officials. We did 
not evaluate the technical or financial soundness of the projects that 
DOE considered for loans. We conducted this performance audit from 
September 2009 through February 2011 in accordance with generally 
accepted government auditing standards. Those standards require that 
we plan and perform the audit to obtain sufficient, appropriate 
evidence to provide a reasonable basis for our findings and 
conclusions based on our audit objectives. We believe that the 
evidence obtained does so. A further discussion of the scope of our 
review and the methods we used is presented in appendix I. 

Background: 

In recent years, concerns have arisen about fluctuations in gasoline 
prices and the environmental impact of petroleum use. For example, the 
price of gasoline increased significantly from 2002 to 2008, 
negatively affecting consumers, domestic automakers, and the U.S. 
economy in general. In addition, gasoline-fueled passenger vehicles 
are a major source of greenhouse gas emissions, and public concern has 
grown about the relationship between their greenhouse gas emissions 
and global climate change. According to our analysis of EPA data, 
passenger cars and light-duty trucks are responsible for a significant 
share of greenhouse gas emissions in the United States--in 2007, their 
use accounted for 18 percent of total greenhouse gas emissions. In 
light of these concerns, in 2007, Congress enacted EISA, which, among 
other things, increased CAFE standards, requiring that the nation's 
automobile manufacturers' new vehicle fleets attain at least an 
average of 35 miles per gallon by 2020. 

In addition to increasing CAFE standards, EISA also authorized, but 
did not provide funding for, the ATVM loan program to provide up to 
$25 billion in loans to support projects to produce more fuel-
efficient passenger vehicles and components. Loans made under the 
program are to be disbursed by the Federal Financing Bank,[Footnote 6] 
have an interest rate equal to the government's cost of funds, 
[Footnote 7] and be in force for a period of 25 years or the projected 
life of the eligible project, whichever is less. Congress also 
required that DOE, when making loans to manufacturers with existing 
facilities, among other things, give priority to those facilities that 
are the oldest or are at least 20 years old. 

In addition to the negative effect that rising fuel prices had on 
domestic automobile sales, the economic recession that began in late 
2007 particularly affected the three major domestic automakers-- 
Chrysler Group, LLC; Ford Motor Company; and General Motors 
Corporation--known as the Detroit 3. Rising fuel prices had negatively 
affected the sales of domestic automakers as consumers shifted to 
smaller, more fuel-efficient vehicles and away from less fuel-
efficient light trucks and sport utility vehicles. At the end of 2008, 
several economic indicators, including economic growth and the 
unemployment rate, worsened while credit markets tightened and 
dampened consumers' demands for new passenger vehicles. Sales of new 
vehicles had been trending downward since 2006, but the decrease was 
markedly sharper in 2008 and 2009. For example, U.S. sales for the 
Detroit 3 dropped by 49 percent from February 2008 through February 
2009, whereas U.S. sales for American Honda Motor Co., Inc.; Nissan 
North America, Inc.; and Toyota Motor North America, Inc., dropped 39 
percent during this period. Additionally, the Detroit 3 had been 
losing U.S. market share to foreign automakers for several years. For 
instance, General Motors' U.S. market share for total light vehicle 
retail sales--including passenger cars and light-duty trucks--fell 
from 27.2 percent in 2004 to 22.1 percent in 2008, while the market 
share of Japanese auto manufacturers grew from 29.8 percent to 38.9 
percent during the same period. Furthermore, since the 1980s, the 
Detroit 3 have relied heavily on sales of light-duty trucks and sport 
utility vehicles, which were more profitable than passenger cars but 
had relatively low fuel economy ratings. As a result of this reliance, 
the Detroit 3 faced more difficulty in achieving substantial 
improvements in fuel economy than most foreign-based manufacturers, 
which historically had produced and sold more fuel-efficient vehicles. 
When proposing the new, more stringent CAFE standards, NHTSA estimated 
that the Detroit 3 would face significantly higher costs to meet 
revised standards than the major Japanese automakers. 

In September 2008, the Consolidated Security, Disaster Assistance, and 
Continuing Appropriations Act provided $7.5 billion to DOE to pay the 
credit subsidy costs of up to $25 billion in ATVM loans.[Footnote 8] 
Congress also provided $10 million to DOE to administer the ATVM loan 
program and required that DOE issue an interim final rule to establish 
regulations necessary to implement the program. DOE issued an interim 
final rule for implementing the program in November 2008. 

DOE Established Program Goals and Set Criteria for Applicant and 
Project Eligibility and Merit: 

To implement the ATVM program, DOE established three goals and set, in 
its interim final rule, certain technical and financial criteria and 
environmental requirements that vehicle and component manufacturers 
must meet to qualify to receive a loan under the program. DOE also 
established criteria for determining the technical and financial 
merits of projects once they have been deemed eligible. 

DOE Established Three Goals for the ATVM Program: 

Although DOE documents do not specifically identify the goals of the 
ATVM loan program, DOE officials told us that they established three 
broad goals for the program: 

* increase the fuel economy of U.S. passenger vehicles as a whole, 

* advance automotive technology in the United States, and: 

* protect taxpayers' financial interests. 

According to DOE officials, the program's first goal is to increase 
the fuel economy of U.S. passenger vehicles as a whole. Specifically, 
EISA calls for the program to make loans to provide funding to 
automobile manufacturers and component suppliers for projects that re-
equip, expand, or establish manufacturing facilities in the United 
States for the purpose of building more fuel-efficient passenger cars 
and light-duty trucks. According to DOE's 2011 budget submission, the 
first and second goals support the agency-level goal to build a 
competitive, low-carbon economy by, among other things, funding 
vehicles that reduce the use of petroleum-derived fuels and 
accelerating growth in advanced automotive technology manufacturing. 
According to DOE officials, the program's third goal is to protect 
taxpayers' financial interests. This goal reflects EISA's requirement 
that loans are to be made to financially viable borrowers. 
Specifically, ATVM's interim final rule states that the program should 
make loans only to borrowers who have a reasonable prospect of 
repaying the loan. According to the Executive Director for DOE's Loan 
Programs Office, whom we interviewed about ATVM as well as the 
office's loan guarantee programs, identifying applicants with projects 
for innovative technologies and strong prospects of repaying a loan is 
particularly difficult because innovative technologies are typically 
more risky than established technologies. 

DOE Set Criteria to Determine Eligibility for Loans: 

DOE set technical and financial criteria and environmental 
requirements in its interim final rule that applicants and their 
projects must meet to be eligible for an ATVM loan.[Footnote 9] 

Technical Eligibility Criteria for Applicants and Their Projects: 

To ensure that applicants meet the minimum fuel economy improvement 
thresholds specified by EISA, DOE established a technical eligibility 
criterion for vehicle manufacturers. An established vehicle 
manufacturer--that is, a manufacturer that produced passenger vehicles 
in model year 2005--must demonstrate that the adjusted average fuel 
economy of the fleet of vehicles it produced for the most recent model 
year is at least equal to the adjusted average fuel economy of the 
fleet it produced in model year 2005.[Footnote 10] An applicant that 
is not an established manufacturer--that is, one that did not produce 
vehicles in 2005--must demonstrate that the fuel economy of its 
proposed vehicles will at least equal the adjusted average fuel 
economy of established manufacturers' model year 2005 vehicles in the 
same vehicle class. 

For applicants deemed eligible, DOE also used statutory-based 
technical criteria that a project must meet to be eligible for a loan 
under the program: 

* a proposed passenger vehicle must meet the fuel economy and 
emissions requirements set forth in the definition of an advanced 
technology vehicle, and a proposed component must be designed for a 
specific advanced technology vehicle; 

* a proposed passenger vehicle or component must be designed or 
manufactured in the United States; and: 

* applicants' proposed projects must meet federal prevailing wage 
requirements for facility construction, alteration, and repair. 
[Footnote 11] 

For a project to meet the first criterion, a proposed vehicle, or a 
vehicle in which a proposed component will be used, must meet the fuel 
economy and emissions requirements for an advanced technology vehicle 
as defined in EISA. EISA specifies that the vehicle, when produced, 
must achieve at least 125 percent of the average fuel economy for all 
manufacturers' vehicles with substantially similar attributes in a 
base year. The vehicle must also meet EPA emissions standards in 
effect at the time the vehicle is manufactured.[Footnote 12] 
Conventional vehicles--that is, vehicles powered primarily by gasoline-
fueled internal combustion engines like those in wide use in the 
United States today--can be considered advanced technology vehicles 
under the law if they meet the fuel economy and emissions 
requirements. In addition, vehicles with newer technologies--including 
conventional hybrid vehicles, such as those that are powered by both 
gasoline and a battery that is charged during driving; plug-in hybrid 
vehicles, such as those that are powered by both gasoline and a 
battery that is charged using an electrical outlet; and all-electric 
vehicles, such as those powered by plug-in batteries alone--can be 
considered advanced technology vehicles under the law. The interim 
final rule calls for component projects to identify the specific 
advanced technology vehicles in which the proposed components will be 
installed. According to its interim final rule, DOE chose 2005 as the 
base year because, among other reasons, model year 2005 CAFE 
compliance fuel economy data for all manufacturers' vehicles were 
fully available when the interim final rule was published, and using 
model year 2005 as the base year "would promote efficient and 
effective administration" of the program and would be consistent with 
the technical eligibility criterion for vehicle manufacturers set 
forth in EISA. To help the program determine whether vehicles share 
"substantially similar attributes," the interim final rule set out 
vehicle classes based on vehicle size and horsepower. DOE based these 
classes largely on EPA's vehicle classes for 2005, which are size-
based. 

For a project to meet the second technical eligibility criterion, the 
interim final rule calls for proposed vehicles or components to be 
either designed or manufactured in the United States. Furthermore, DOE 
set limits on the types of design activities--that is, engineering 
integration--that may be paid for using ATVM loan funds. In general, 
engineering integration involves the design and layout of production 
processes necessary to implement and build a new vehicle or component, 
according to the ATVM Director. The interim final rule allows two 
engineering integration activities: incorporating qualifying 
components into the design of an advanced technology vehicle and 
designing and developing production facilities for producing 
qualifying components or vehicles. 

Because of their technical expertise, staff in DOE's Office of Energy 
Efficiency and Renewable Energy (EERE) are responsible for determining 
whether applicants and proposed projects have met the program's 
technical eligibility criteria. EERE staff perform most of the 
technical eligibility analysis; for example, EERE staff determine 
whether the adjusted average fuel economy of an applicant's current 
production fleet is at least equal to the adjusted average fuel 
economy of the applicant's comparable fleet in model year 2005. In 
addition, EERE staff rely on the Argonne National Laboratory to 
analyze applicant-provided data using a computer model developed by 
the laboratory. The model estimates the miles per gallon (mpg) that a 
proposed vehicle is likely to achieve.[Footnote 13] EERE uses the 
results to determine whether the vehicle meets the program's fuel 
economy eligibility criterion. According to EERE staff, laboratory 
staff test one vehicle per project. In the case of a single-vehicle 
project, laboratory staff analyze data provided for that vehicle 
alone. For projects for which the borrower plans to produce multiple 
variations of a vehicle, the applicant provides data on a vehicle it 
has deemed to be "representative" of those it plans to produce under 
the project.[Footnote 14] Our review of DOE's test results and 
approved loan documents indicated that, in the event that the project 
is approved for a loan, the vehicles produced may or may not have the 
same specifications as the representative vehicle. According to EERE 
staff, to judge whether the variations of the vehicle that were not 
modeled are likely to meet the program's fuel economy eligibility 
criterion, the staff compare applicant-submitted data on the expected 
mpgs of those variations with that eligibility criterion. 

Financial Eligibility Criteria for Applicants: 

Applicants must also demonstrate financial viability to be selected 
for an ATVM loan. According to DOE's interim final rule, an applicant 
is financially viable if it has (1) a reasonable prospect of repaying 
principal and interest in accordance with the proposed loan terms and 
(2) a positive net present value--that is, estimated flow of future 
income exceeds estimated flow of future costs when discounted and 
expressed in today's dollars. Furthermore, by law, for the purpose of 
determining its financial viability, a selected applicant must not 
receive any additional federal funding associated with the proposed 
project. 

To determine whether an applicant has a reasonable prospect of 
repayment, ATVM staff are to analyze an applicant's current financial 
condition and develop a projection of its ability to repay the loan 
over time. Specifically, ATVM staff are to analyze an applicant's 
liquidity and debt-to-equity ratio at the time of the application, as 
well as the applicant's balance sheet and income statements. ATVM 
staff then build on this financial analysis to examine an applicant's 
prospect of repayment by determining an applicant's net present value. 
ATVM staff use an applicant's projected cash flows and underlying 
assumptions, as well as the state of the automotive industry, to make 
a net present value determination. The ATVM program uses accounting 
and market analysis firms to help with its financial analysis, 
according to ATVM officials. For example, the market analysts assess 
whether an applicant's likely production volume and sales projections 
are realistic given overall market conditions. ATVM officials also 
told us the firms perform cost analyses to help verify the costs of 
proposed projects. 

Environmental Eligibility Requirements for Projects: 

To comply with the National Environmental Policy Act (NEPA),[Footnote 
15] DOE requires that ATVM applicants submit three environmental 
impact reports for each project they propose. Specifically, applicants 
are to submit reports on the following: 

* the likely environmental impacts of the project, including the 
construction and operation of the facilities to be associated with it; 

* the likely socioeconomic impacts of constructing and operating the 
proposed project, including the likely effects on nearby towns and 
counties; and: 

* a comparison of the environmental impacts proposed in the first 
report with alternatives to the project, including a comparison of the 
environmental benefits and costs with the economic benefits and costs. 

Depending on the proposed activities, applicants may have to take
additional steps to mitigate the potential environmental impacts of 
their projects. If, however, applicants demonstrate minimal impacts, 
these reports may satisfy the NEPA requirements. For example, a 
project may be “categorically excluded” from a more detailed 
environmental analysis if it falls within a category of activities 
that a federal agency has previously determined has no significant 
environmental impact. To determine whether applicants meet the NEPA 
requirements for a categorical exclusion or whether additional 
analysis and, perhaps, mitigation are needed, specialists in DOE’s 
NEPA office review ATVM applicants’ environmental impact reports. They 
then share the results of their review with the ATVM Director and 
staff. 

DOE Also Set Criteria for Determining Eligible Projects' Technical and 
Financial Merits: 

To help choose among applicants and projects deemed eligible, DOE also 
considers their technical and financial merits. According to DOE 
officials, to determine technical merit, at least three experts from 
EERE or the DOE national laboratories individually review each project 
according to four criteria and provide written documentation of the 
strengths and weaknesses in each area. The technical merit criteria, 
as specified in the program's procedures, are (1) improved vehicle 
fuel economy; (2) contribution to improved fuel economy of passenger 
vehicles in use in the United States; (3) promotion of the use of 
advanced fuels (e.g., electricity and ultra-low sulfur diesel); and 
(4) reductions in petroleum use by the passenger vehicles in use in 
the United States. After the individual reviews, the experts must 
agree on a single final merit score. To the extent that a project 
exceeds the fuel economy eligibility threshold for its vehicle class, 
the project receives a correspondingly higher technical merit score. 

According to program procedures for determining financial merit, the 
ATVM program staff score an applicant on the basis of its likely 
ability to repay a loan. As part of this effort, the Credit Division-- 
a separate group within DOE's Loan Programs Office--reviews the 
financial soundness of applicants and their projects, producing both a 
credit rating for applicants and an estimate of the applicants' credit 
subsidy cost.[Footnote 16] ATVM staff rank an applicant's financial 
merit by considering (1) the credit rating generated by the Credit 
Division, (2) the Credit Division's estimated credit subsidy cost and 
the proportion that cost represents of the funds available to the 
program for paying credit subsidy costs, and (3) the loan's credit 
subsidy rate, which is the ratio of the loan's credit subsidy cost to 
the total amount of the loan. A loan with a relatively low credit 
subsidy rate is considered the most desirable. The Credit Division 
briefs OMB on its analysis and its credit subsidy cost estimate for 
each applicant. OMB then reviews this analysis and produces the final 
credit subsidy cost for the ATVM applicant. 

In addition, the ATVM staff told us they gather information on how 
applicants and their projects address six additional "policy factors:" 

* a project's potential impact on the local economy, such as job 
creation or job preservation; 

* whether a project is likely to advance automotive technology; 

* an applicant's significance to the overall well-being of the 
automotive industry; 

* the risk that an applicant may not be able to complete a proposed 
project, including difficulty in translating plans for innovative 
technology into manufactured vehicles and components; 

* the geographic location that will be affected by a proposed project; 
and: 

* the age of any facilities that would be improved with the loan 
proceeds. 

The ATVM staff provide the information to the Credit Review Board, a 
group composed of senior DOE officials charged with overseeing the 
ATVM program and making recommendations to the Secretary of Energy on 
whether to award ATVM loans.[Footnote 17] Finally, the program's 
procedures call for the Credit Review Board to weigh an applicant's 
technical and financial merit scores, the credit subsidy cost approved 
by OMB, the six policy factors, and other information, such as a 
summary of the financial analysis, to decide whether to recommend that 
the Secretary of Energy award a loan. 

The ATVM Program Has Awarded $8.4 Billion in Loans That Largely 
Enhance Conventional Vehicle Technology, but the Program May Be Unable 
to Lend the Full Authorized Amount: 

The loan funds the ATVM program has awarded largely enhance 
conventional vehicle technology and, according to DOE, are expected to 
result in improved fuel economy. The remainder of the funds support 
vehicles with newer technologies--specifically, conventional hybrid 
vehicles, plug-in hybrid vehicles, and all-electric vehicles--that are 
also expected to result in improved fuel economy. In addition, DOE 
officials cited other benefits that could result from the projects. 
The loans the ATVM program has made to date have used almost half of 
the $7.5 billion available to pay credit subsidy costs. At this rate, 
the program may not be able to provide the full $25 billion in loans 
allowed by statute. 

The Loan Funds Largely Support Projects for Enhancing Conventional 
Vehicle Technology, with the Remainder Supporting Newer Technologies: 

Of the about $8.4 billion in loans the ATVM program has awarded to 
date, $5.9 billion went to the Ford Motor Company; $1.4 billion to 
Nissan North America; $529 million to Fisker Automotive, Inc.; and 
$465 million to Tesla Motors, Inc.[Footnote 18] About $5.2 billion--62 
percent of the loan funds awarded so far--is for projects that largely 
enhance the technologies of conventional vehicles powered by gasoline- 
fueled internal combustion engines. These projects include such fuel- 
saving improvements as adding assisted direct start technology to 
conventional vehicles, which reduces fuel consumption by shutting off 
the engine when the vehicle is idling (e.g., while at traffic lights) 
and automatically restarting it with direct fuel injection when the 
driver releases the brake. According to DOE's analysis, the projects 
will result in vehicles with improved fuel economy that will 
contribute in the near term to improving the fuel economy of the 
passenger vehicles in use in the United States as a whole because the 
conventional vehicles are to be produced on a large scale relatively 
quickly and offered at a price that is competitive with other vehicles 
being offered for sale. We are not reporting details on DOE's 
expectations for production of the enhanced conventional vehicles or 
those vehicles' expected prices because of concerns raised by Ford 
about the proprietary nature of this information. 

DOE used data from the borrowers in its modeling software--the 
Powertrain System Analysis Toolkit (PSAT)--to estimate the fuel 
economy of the vehicles being considered for ATVM loans. For 
conventional vehicles and conventional hybrid vehicles, fuel economy 
was estimated in terms of mpg. For all-electric and plug-in hybrid 
vehicles, fuel economy was estimated in terms of the number of miles 
the vehicles can drive with the energy equivalent of one gallon of 
gasoline. The PSAT model, in an effort to be consistent with CAFE mpg 
ratings (which are calculated after vehicles have been produced), 
estimates a vehicle's fuel economy using two drive-cycle tests--
commonly referred to as the Highway and City tests. EPA's CAFE mpg 
ratings are typically higher than its ratings that appear on new car 
window stickers, in part because, since 2008, the window sticker 
ratings have been calculated using three additional drive-cycle tests--
commonly referred to as the High Speed, Air Conditioning, and Cold 
Temperature tests. Furthermore, EPA has not yet made final a standard 
calculation for reporting the fuel economy of plug-in hybrids and all-
electric vehicles. EPA expects to issue a regulation standardizing 
fuel economy calculations for plug-in hybrid and all-electric vehicles 
that it will use when reporting the estimated fuel economy of new 
vehicles to the public, such as on a new car's window sticker. 

According to our calculations using DOE's modeled estimates of fuel 
economy, the projects for enhanced conventional vehicles are expected 
to result in vehicles with improved fuel economy that exceed both the 
program's eligibility requirements and the CAFE targets that will be 
in place at the time the vehicles are produced.[Footnote 19] We 
calculated the extent to which the vehicles are expected to exceed the 
program's fuel economy eligibility requirements by comparing DOE's 
estimated fuel economy for the vehicles it used to establish the 
projects' eligibility for the program to the fuel economy of the 
comparable vehicle class for model year 2005. Taken together, the 
average expected fuel economy of the enhanced conventional vehicle 
projects is 33.5 mpg. This is about 42 percent better than the average 
2005 baseline of 23.6 mpg for the respective vehicle classes and 
exceeds the 25 percent improvement over the 2005 baseline required to 
be eligible for the program.[Footnote 20] We also used DOE's fuel 
economy estimates to calculate the extent to which the funded vehicles 
are expected to exceed the CAFE targets that will be in place at the 
time the vehicles are produced. According to our calculations, the 
projects for enhanced conventional vehicles as a whole are expected to 
achieve fuel economy that exceeds the CAFE targets by, on average, 21 
percent. 

The remaining funds--$3.1 billion, or about 38 percent of the $8.4 
billion--support projects for vehicles and components with newer 
technologies. Fisker has received a loan for two plug-in hybrid 
projects: the Karma, a sedan classified by DOE as a subcompact- 
performance sedan at the time its eligibility was established; and the 
Nina, classified by DOE as a subcompact sedan.[Footnote 21] Tesla 
received a loan to manufacture an all-electric midsize sedan, the 
Model S, and Nissan received a loan to manufacture an all-electric 
vehicle, the LEAF, classified by DOE as a small wagon at the time its 
eligibility was established.[Footnote 22] Finally, a portion of the 
loan to Ford supports projects for manufacturing conventional hybrid 
and all-electric vehicles. In addition, there are two advanced 
technology components projects: Nissan has a project to build a 
manufacturing facility to produce batteries for the LEAF and 
potentially other vehicles, and Tesla has a project to build a 
manufacturing facility to produce electric battery packs, electric 
motors, and electric components for the Tesla Roadster and vehicles 
from other manufacturers. In contrast to the projects supporting 
enhancements to conventional vehicles, DOE's and the borrowers' 
analyses indicate that the projects with newer technologies will 
result in vehicles with far greater fuel economy gains per vehicle but 
that these vehicles will be sold in smaller volumes, thereby having a 
less immediate impact on the fuel economy of total U.S. passenger 
vehicles. For example, DOE's analysis estimates that the Fisker Nina 
subcompact sedan will achieve the equivalent of about 111 mpg. Fisker 
has stated production of the Nina will begin in late 2012, with 
expected production capacity of 70,000 to 100,000 vehicles per year. 
The Fisker Karma is estimated by DOE to achieve fuel economy that is 
the equivalent of 86 mpg. Fisker has stated that production of the 
Karma will begin in 2011 and that the company will have a production 
capacity of 15,000 vehicles per year. The Karma has a base price of 
$95,900, prior to any federal tax credit. Similarly, DOE's analysis 
estimates that the Tesla Model S will achieve the equivalent of about 
111 mpg, with production planned to begin in 2012. According to Tesla 
officials, the company plans to produce as many as 7,000 vehicles in 
2012 and up to 20,000 vehicles per year thereafter. In addition, DOE's 
analysis indicates that the Nissan LEAF is estimated to achieve the 
equivalent of about 165 mpg.[Footnote 23] The LEAF is currently listed 
to sell for about $33,000 each, and Nissan has accepted 20,000 
reservations for the vehicle in the United States.[Footnote 24] The 
company expects to have a production capacity in the United States of 
150,000 vehicles per year once the ATVM-funded manufacturing facility, 
scheduled to open in 2012, reaches full capacity in 2015. Finally, for 
Ford, we are not reporting information on expected production levels 
or prices for conventional hybrids or all-electric vehicles to be 
produced with ATVM loan funds because the company is concerned about 
the proprietary nature of this information. 

According to our calculations, the projects for vehicles with newer 
technologies, like the projects for enhanced conventional vehicles, 
are expected to result in improved fuel economy that exceeds the 
program's eligibility requirements, as well as CAFE targets. The 
average expected fuel economy of the vehicles with newer technologies 
is 78.1 mpg. This is about 181 percent better than the average 2005 
baseline of 27.8 mpg for the respective vehicle classes and exceeds 
the 25 percent improvement over the baseline required to be eligible 
for the program. Using DOE's fuel economy estimates to calculate the 
extent to which the funded vehicles are expected to exceed the CAFE 
targets that will be in place at the time the vehicles are produced, 
we calculated that the vehicles' fuel economy is expected to be about 
161 percent better than the 29.9 mpg CAFE target average for the 
respective vehicles. 

The extent to which DOE's and borrowers' projections of gains in fuel 
economy and reductions in petroleum use will prove accurate depends on 
a number of factors. These include the borrowers' ability to overcome 
technical challenges they may face in producing vehicles that achieve 
the intended fuel economy gains and the extent to which the vehicles 
are sold in numbers that meet the initial projections, which itself 
depends largely on whether consumers consider the vehicles to be 
competitive in price and costs to operate when compared with vehicles 
offered by competitors, including conventional vehicles and those with 
newer technologies. Moreover, the extent to which the vehicles that 
are sold actually replace older vehicles currently on the road will 
affect the accuracy of the projected gains in fuel economy and 
reductions in petroleum use; similarly, how much consumers use the new 
vehicles compared to their use of the replaced vehicles will affect 
the accuracy of the estimates. 

DOE Officials Also Cited Benefits Other than Improved Fuel Economy 
That Projects Could Provide: 

In addition to improved fuel economy, ATVM program staff identified 
other potential benefits projects could provide. Benefits cited by the 
program staff include the geographic location of proposed projects-- 
that is, whether a project would benefit an area that had not 
otherwise received funding under the program--and the potential impact 
of the projects in creating or sustaining economic development--in 
particular, creating or sustaining jobs (see table 1). In the case of 
Fisker, the program staff also identified the extent to which the 
company's projects would support U.S. parts suppliers, noting that 
over 65 percent of the parts for Fisker's Karma are expected to come 
from U.S. parts suppliers. 

Table 1: ATVM Loan Program Expectations of Jobs to Be Created or 
Preserved and Their Locations: 

Borrower: Ford; 
Locations of facilities funded by ATVM loans: 13 factories in 
Illinois, Kentucky, Michigan, Missouri, and Ohio; 
Borrowers' estimates of jobs created or preserved: 33,000. 

Borrower: Nissan; 
Locations of facilities funded by ATVM loans: 2 factories in Tennessee; 
Borrowers' estimates of jobs created or preserved: 1,300. 

Borrower: Fisker; 
Locations of facilities funded by ATVM loans: 1 factory in Delaware; 
Borrowers' estimates of jobs created or preserved: 2,000. 

Borrower: Tesla; 
Locations of facilities funded by ATVM loans: 2 factories in 
California; 
Borrowers' estimates of jobs created or preserved: 1,500. 

Total: 
Borrowers' estimates of jobs created or preserved: 37,800. 

Source: ATVM analysis of borrower data. 

[End of table] 

ATVM program officials also noted other benefits the projects could 
provide after the loans had been awarded. For example, the ATVM 
Director stated that awarding loans to all-electric vehicle 
manufacturers has influenced major automakers to enter the advanced 
automobile technology market in order to remain competitive. 
Specifically, he noted that the recently announced partnership between 
Tesla and Toyota to build components for all-electric vehicles may 
have been encouraged by the ATVM loan to Nissan supporting the all-
electric LEAF. Additionally, DOE has announced that Nissan is forming 
partnerships with states, counties, cities, and electric utilities to 
install charging stations needed to introduce and sustain all-electric 
vehicles. 

Moreover, ATVM officials noted that all of the funded projects could 
result in environmental benefits--for example, by reducing petroleum 
consumption, they could reduce emissions of greenhouse gases and air 
pollutants. However, the extent of the environmental benefits will 
depend a number of factors, including the number and type of ATVM- 
funded vehicles consumers buy, the number and type of vehicles 
currently on the road that consumers replace with the ATVM-funded 
vehicles produced, and the extent to which consumers use the new 
vehicles compared with the vehicles they replaced. These benefits will 
also depend on the vehicles that the borrowers actually deliver to the 
market. DOE's estimates of fuel-economy gains were calculated using 
the information the borrowers provided on the vehicles they plan to 
produce; however, the loan agreements allow the borrowers to alter 
their production plans for individual vehicles as long as the projects 
as a whole comply with the program's eligibility requirements. 

Furthermore, consumers may be deterred from buying ATVM-funded 
vehicles if they are not competitive in terms of their purchase prices 
and their costs to operate when compared with vehicles available from 
competitors, including conventional vehicles and those with newer 
technologies (such as all-electric vehicles) that were not funded by 
the ATVM program. The competitiveness of the three types of vehicles 
with newer technologies, in particular, will be determined largely by 
the cost of batteries and, for plug-in hybrid and all-electric 
vehicles, by trends in the price of gasoline relative to the price of 
electricity and the available infrastructure for charging batteries. 
Moreover, because the plug-in hybrid and all-electric vehicles rely on 
electricity, the extent to which they will reduce greenhouse gases and 
air pollution depends on, among other things, whether producing the 
electricity they use leads to fewer emissions of greenhouse gases and 
pollutants than the gasoline the electricity replaces. For example, 
hydroelectric plants produce significantly fewer greenhouse gases and 
pollutants than coal-burning plants. In June 2009, we reported on 
these and other issues related to consumer adoption and the 
environmental effects of advanced technology vehicles.[Footnote 25] 

The ATVM Program Has Used about Half of the Funds Available to Pay 
Credit Subsidy Costs, Which May Limit the Program's Ability to Loan 
the Entire $25 Billion Allowed by Statute: 

In order to make loans, federal agencies are required by the Federal 
Credit Reform Act of 1990 to set aside the estimated net long-term 
costs of the loans to the government over the life of the loans in 
present value terms--that is, the loans' credit subsidy costs. In 
September 2008, the Congressional Budget Office (CBO) was tasked with 
determining the amount of funds needed by the ATVM program in order to 
pay the credit subsidy costs that would enable the program to award 
$25 billion in loans--the full amount of the program's loan authority. 
CBO estimated that a total of $7.5 billion would be needed to pay 
credit subsidy costs. This would amount to an average credit subsidy 
rate of 30 percent per loan ($7.5 billion divided by $25 billion 
equals 30 percent). In line with CBO's estimate, Congress appropriated 
$7.5 billion to be used to pay credit subsidy costs for the ATVM 
program. However, the average credit subsidy rate for the $8.4 billion 
in loans awarded as of February 24, 2011, was 39 percent--a total of 
roughly $3.3 billion in credit subsidy costs. At this rate, the $4.2 
billion remaining to be used to pay credit subsidy costs will not be 
sufficient to enable DOE to loan the full $25 billion in loan 
authority. For DOE to make loans that use all of the remaining $16.6 
billion in loan authority, the credit subsidy rate for the loans would 
have to average no more than 25 percent ($4.2 billion divided by $16.6 
billion). 

A primary reason for the high credit subsidy rate for the loans made 
thus far is that they were made at a time of particularly difficult 
economic conditions for the automotive industry. For example, in 
September 2008, by the time CBO made its credit subsidy cost estimate, 
Ford's credit rating was B-, indicating the company was more 
vulnerable to adverse business, financial, and economic conditions 
than higher-rated companies but had the capacity to meet its financial 
commitments.[Footnote 26] However, when the ATVM program considered 
Ford's application in June 2009, Ford's credit rating had dropped to 
CCC+ as a result, in part, of the severe economic downturn. Since the 
ATVM loan recipients first applied to the program, the economic 
standing of the U.S. automotive industry has improved. For example, 
Ford's credit rating had risen to B+ in August 2010. The improved 
economic conditions within the industry suggest that the loans awarded 
to date might not have reached an average credit subsidy rate of 39 
percent had their credit subsidy costs been determined at a more 
economically favorable time. The Federal Credit Reform Act of 1990 and 
OMB guidance call for initial credit subsidy rates to be updated or 
"reestimated" annually to reflect any changes in assumptions related 
to future loan performance, such as the recent changes in the economic 
conditions of the U.S. automotive industry. However, reestimates that 
result in lower credit subsidy costs do not return funds to the 
program--once funds for credit subsidy costs have been apportioned for 
a loan, they are no longer available to support other loans. 
Therefore, it remains unclear whether the ATVM program will have 
sufficient funds remaining to loan the full amount allowed by statute. 

The ATVM Program Has Begun Overseeing Loans to Ensure Borrowers Comply 
with Financial and Technical Requirements but Has Not Engaged 
Engineering Expertise That Would Help Ensure That Projects Are 
Delivered as Agreed: 

ATVM program staff have set procedures and have begun using those 
procedures to oversee borrowers' compliance with the financial and 
technical requirements of the loans. ATVM staff share responsibility 
for financial oversight of the loans with external auditors engaged 
for that purpose. Although ATVM program procedures call for sufficient 
expertise to help oversee borrowers' compliance with the loans' 
technical requirements, the ATVM program has not yet engaged such 
engineering expertise and without it, cannot be sure that the projects 
are being delivered as agreed. 

To help ensure that borrowers are complying with the financial 
requirements of the loans, the ATVM program calls for staff and 
external auditors to share oversight duties. ATVM officials developed 
monitoring procedures and a plan for each borrower that specifies the 
financial information to be collected and analyzed by ATVM staff. The 
ATVM program staff, as called for in the procedures and plans, oversee 
the loans' financial requirements by monitoring the financial health 
of borrowers to help identify potential challenges they might face in 
repaying the loans. To do this, ATVM staff analyze market trends and 
conditions that could affect the borrowers and information on the 
financial standing of the companies. For example, according to the 
procedures, ATVM staff collect and analyze information on market 
trends in the automobile industry that may affect the borrowers' 
liquidity, as well as analyze a variety of information provided by 
borrowers, such as their income statements, debt levels, changes to 
credit ratings, and the value of pledged collateral. If ATVM staff 
determine that a borrower is facing financial challenges but remains 
financially viable, they are to develop a plan for restructuring the 
loan, among other steps, to protect the investment. In the event that 
the steps fail and the borrower is deemed to be no longer financially 
viable, the ATVM program may foreclose on a loan if it concludes that 
doing so would offer the best protection of the taxpayers' financial 
interests. 

The ATVM program is also using external auditors to oversee borrowers' 
financial performance by verifying that loan funds are being spent as 
intended, as called for by the program's procedures. To date, the 
auditors have reported instances in which three of the four borrowers 
did not spend funds as required, with, for example, two borrowers 
spending some loan funds outside the United States and the third 
spending some loan funds on ineligible payroll expenses. ATVM 
officials told us these instances were minor because the amounts were 
small relative to the total value of the loans and that the 
inappropriate use of funds has been corrected in these cases. 
Moreover, the officials stated that the borrowers have made 
corrections to their practices in light of these findings. We did not 
evaluate the extent to which borrowers have complied with requirements 
for use of ATVM funds or the sufficiency of the borrowers' corrections 
of the instances noted by the auditors. 

The ATVM program's procedures also specify technical oversight duties, 
a primary purpose of which is to confirm that borrowers have made 
sufficient technical progress before the program disburses additional 
funds. ATVM staff are to periodically review information borrowers 
submit on projects' progress to determine whether they are adhering to 
the technical requirements of the loan agreements. The procedures also 
call for "heightened [technical] monitoring" when borrowers are (1) 
constructing or retrofitting manufacturing facilities or (2) 
performing engineering integration--that is, designing and building 
vehicle and component production lines. Further, the procedures call 
for engaging independent engineering expertise to provide independent 
validation of project progress when ATVM staff determine it is needed. 
ATVM officials have indicated independent engineering expertise is an 
important aspect of heightened technical monitoring. 

To date, according to ATVM officials, the program's technical 
oversight for all the funded projects has largely consisted of ATVM 
staff reviewing borrower-submitted information on the projects' 
technical progress. Although the expertise of program staff is largely 
financial, rather than technical, ATVM officials told us that their 
technical reviews have been sufficient so far, including those reviews 
for the one borrower officials identified as having projects at a 
stage requiring heightened technical monitoring. In that regard, the 
program staff responsible for overseeing the ATVM loan to Ford has 
been reviewing Ford's quarterly reports on the progress of production 
and engineering integration activities, visiting facilities, and 
meeting regularly with company officials to discuss the projects' 
progress. According to the ATVM Director and staff, established 
manufacturers such as Ford will require little additional independent 
engineering expertise to supplement the oversight performed by ATVM 
staff because those manufacturers have experience with successfully 
bringing vehicles from concept to production. In contrast, the 
Director and staff explained that the start-up manufacturers are less 
experienced with the complexities of setting up new production 
processes and, therefore, their projects may be riskier. For this 
reason, ATVM officials told us, they plan to engage independent 
engineering expertise in the months ahead to monitor the activities of 
the start-up companies and Nissan once they reach a phase requiring 
heightened technical monitoring. According to ATVM staff, as of 
September 2010, they were in the process of evaluating one 
consultant's proposal to provide engineering expertise and were 
working with DOE's Loan Guarantee Programs to make those programs' 
manufacturing consultants available to assist the ATVM program. 

According to documents we reviewed, however, all four borrowers--
rather than the single borrower that the ATVM program staff asserts--
have one or more projects that, according to the program's procedures, 
have already reached the stage requiring heightened technical 
monitoring. Specifically, Nissan has begun constructing its new 
battery manufacturing facility, and Fisker, Ford, and Tesla are 
performing engineering integration. Because ATVM staff, whose 
expertise is largely financial rather than technical, are so far 
providing technical oversight for the loans without the assistance of 
independent engineering expertise, the program may be at risk of not 
identifying critical deficiencies. 

DOE Lacks Performance Measures That Would Enable It to Fully Assess 
the Extent to Which the ATVM Program Has Achieved Its Goals: 

DOE lacks sufficient performance measures that would enable it to 
fully assess whether the ATVM program has achieved its three goals. 
Principles of good governance indicate that agencies should establish 
quantifiable performance measures to demonstrate how they intend to 
achieve their program goals and measure the extent to which they have 
done so.[Footnote 27] These performance measures should allow agencies 
to compare their programs' actual results with desired results and 
should be linked to program goals. 

For the program goal of increasing the fuel economy of total passenger 
vehicles in use in the United States, the ATVM program has established 
two performance measures that assess the performance of ATVM-funded 
vehicles relative to the performance of similar vehicles in model year 
2005, the base year. However, the measures do not enable DOE to assess 
the program's success in increasing the total fuel economy of U.S. 
passenger vehicles. The current ATVM program performance measures 
assess (1) the extent to which the average fuel economy of vehicles 
manufactured through projects funded by the ATVM program has increased 
over the average fuel economy of similar vehicles in model year 2005, 
expressed in percentage terms, and (2) the extent to which the 
petroleum used by vehicles manufactured through projects funded by the 
ATVM program has decreased from the amount used by similar vehicles in 
model year 2005, expressed in millions of gallons of fuel per year. 

While these two performance measures will enable DOE to assess the 
fuel economy improvements of ATVM-funded vehicles specifically, the 
measures stop short of enabling DOE to fully determine the extent to 
which it has accomplished its overall goal of improving the fuel 
economy of all passenger vehicles in use in the United States. The 
measures stop short, in part, because neither isolates the 
improvements resulting from the program from those due to other 
factors. For example, the final rule effective July 6, 2010, 
implementing new CAFE standards requires that automakers selling 
vehicles in the United States produce more fuel-efficient passenger 
cars and light-duty trucks starting in model year 2012. In light of 
these new standards, in the future, ATVM borrowers might have acted to 
increase fuel economy and reduce the petroleum use of their vehicles 
in order to meet the more stringent CAFE standards--even without the 
ATVM funds. Without knowing the actions these companies might have 
taken in the absence of ATVM funding, the program will not be able to 
measure the extent to which the improvements in fuel economy and 
reductions in petroleum used by ATVM-funded vehicles resulted directly 
from the program. In prior work, we noted that it can be difficult to 
isolate the improvements resulting from a federal program when 
external factors also play a role, and this can hinder agency efforts 
to identify meaningful performance measures. In situations where a 
federal program is one factor among many contributing to an intended 
result of a program, measuring the effect of the other factors may 
help the agency measure the effect of the program. CAFE standards are 
one external factor affecting automakers' decisions about improving 
the fuel economy of their vehicles. Facing new CAFE standards 
beginning in model year 2012, automakers will need to improve the fuel 
economy of their vehicles to bring them in line with the new 
standards, and U.S. automakers in most cases have historically 
complied with increases in CAFE standards. For those ATVM-funded 
vehicles that will have achieved fuel economy that exceeds the CAFE 
targets in place at the time they are delivered, the extent to which 
their fuel economy exceeds the CAFE targets could indicate the maximum 
amount of improvement in fuel economy that could be attributed to the 
program. 

Furthermore, the two performance measures stop short of enabling DOE 
to account for the effect of the ATVM program on the fuel economy of 
the passenger vehicles in use in the United States as a whole because 
they do not put the fuel economy improvements of vehicles funded by 
the program into the broader context of total U.S. passenger vehicle 
fuel economy. The two measures will enable DOE to take critical steps 
toward assessing its achievement of the overall goal by accounting for 
the fuel economy improvements and petroleum use reductions specific to 
ATVM-funded vehicles. However, assessing achievement of the overall 
goal would require DOE to put those specific achievements into the 
context of the fuel economy of all passenger vehicles in the United 
States and would require accounting for several factors, including the 
number and type of ATVM-funded vehicles consumers buy, the number and 
type of vehicles currently on the road that consumers replace with 
ATVM-funded vehicles, and the extent to which consumers use the ATVM- 
funded vehicles as compared with the vehicles they replaced. Our prior 
work has highlighted the importance of developing performance measures 
that provide a basis for comparing actual results with goals. Although 
problems with isolating program contributions make it difficult to 
develop performance measures that account for program effects with 
precision, a link between goals and measures is needed to provide 
important information for decision makers on the effectiveness of a 
program. In the case of the ATVM program, this would mean not only 
isolating the contribution of the program when it accounts for the 
fuel economy improvements and reductions in petroleum used for ATVM-
funded vehicles, but also taking into account the numbers and types of 
ATVM vehicles that consumers have bought, the numbers and types of 
vehicles consumers have replaced, and the extent to which the new 
vehicles have been used by consumers relative to the old vehicles. 

In addition, the ATVM program lacks performance measures that will 
allow DOE to assess the extent to which it has achieved the other two 
goals of the program--advancing automotive technology and protecting 
taxpayers' financial interests. ATVM program managers told us they 
believe that supporting the first generation of all-electric vehicles 
will further the program's second goal of advancing automotive 
technology by providing a springboard for industry to expand 
production of that technology in future years. However, the ATVM 
program does not have measures that will enable DOE to assess the 
extent to which the technologies it has supported have been adopted in 
the marketplace. Similarly, officials have said that to achieve the 
program's third goal of protecting taxpayers' financial interests, the 
program must award loans only to borrowers who are financially viable--
that is, have reasonable prospects of repayment. However, the ATVM 
program has not identified related performance measures. When 
overseeing the loans, ATVM program procedures call for program staff 
to periodically review the borrowers' financial condition, examining 
such factors as borrowers' liquidity and debt service coverage ratios--
used when the program established the borrowers' eligibility--as well 
as other indicators of borrowers' performance, such as timeliness of 
payments. However, the program has not set targeted levels of 
performance for all of these factors to be used to judge the financial 
condition of the borrowers and the extent to which taxpayers' 
financial interests have been protected. 

Conclusions: 

DOE established the ATVM program so that it would, according to 
program estimates, result in fuel economy gains for the nation's 
vehicle fleet, advance the availability of innovative automotive 
technology to consumers, and protect the taxpayers' financial 
interests. In making its first loans, the ATVM program has injected 
significant funds into the U.S. automotive industry for promoting 
improved fuel efficiency of conventional vehicles and encouraging the 
development of vehicles with newer technologies that rely less, or not 
at all, on petroleum. 

Technical oversight of the program is important to ensure that it 
delivers on its promises of advanced vehicles and components, thereby 
providing U.S. taxpayers what they paid for through the loans. 
However, the program's current approach of using ATVM staff to monitor 
the technical progress of the projects may not be sufficient to ensure 
that the vehicles are delivered as agreed because their expertise is 
largely financial and not technical--that is, ATVM staff lack the 
engineering expertise called for in the program's procedures, which 
cite the need for independent engineering expertise to validate 
project progress. Without qualified oversight to analyze the 
information submitted by the borrowers and to provide technical 
monitoring, the ATVM program cannot be adequately assured that the 
borrowers are delivering the vehicle and component projects as 
required by the loan agreements. 

Further, assessing the extent to which the ATVM program has delivered 
on its promises requires the discipline of using quantifiable 
performance measures tied to program goals as a means of charting the 
program's direction and assessing its achievement. Although the ATVM 
program has performance measures tied to DOE's first goal of 
increasing the fuel economy of passenger vehicles in use in the United 
States, because these measures do not isolate the net effect of the 
program--that is, the improvements in fuel economy achieved by ATVM-
funded vehicles that are the direct result of the program and that 
would not have occurred for other reasons, such as complying with new 
CAFE standards--gains in fuel economy and reductions in petroleum use 
that the program reports could be inaccurate. The extent to which the 
ATVM-funded vehicles achieve fuel economy that exceeds the CAFE 
targets in place at the time the vehicles are delivered, and 
associated reductions in petroleum use, may indicate the maximum 
amount of improvement in fuel economy that could be attributed to the 
ATVM program and could provide a useful metric for assessing program 
performance. Further, because the performance measures for the fuel 
economy goal stop short of quantifying the impact of the program on 
total U.S. passenger vehicles--by not taking into account the number 
and type of ATVM-funded vehicles consumers may purchase, the number 
and type of vehicles that may be replaced, and the relative usage of 
the new vehicles compared with that of the old ones--DOE will be 
unable to assess the extent to which the program has achieved this 
goal. Moreover, because DOE does not have quantifiable measures for 
assessing the extent to which the advanced technologies supported by 
the program have been adopted in the marketplace, DOE will not be able 
to assess its achievement of this second goal. Similarly, DOE's 
ability to assess its achievement of its third goal--protecting 
taxpayers' financial interests--is limited because DOE has not 
identified measures for quantifying indicators of borrowers' financial 
condition or other indicators of borrower performance. 

Recommendations for Executive Action: 

To help ensure the effectiveness and accountability of the ATVM 
program, we recommend that the Secretary of Energy direct the ATVM 
Program Office to take the following two actions: (1) accelerate 
efforts to engage sufficient engineering expertise to verify that 
borrowers are delivering projects as agreed and (2) develop sufficient 
and quantifiable performance measures for its three goals. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to the Secretary of Energy or his 
designee for review and comment. In his comments, the Executive 
Director of DOE's Loan Programs Office responded that he was pleased 
that we reported on the progress DOE has made in awarding loans that 
promise to deliver gains in fuel economy, but that DOE did not agree 
with either of our two recommendations. 

DOE disagreed with our recommendation that the agency accelerate its 
efforts to engage sufficient engineering expertise to verify that 
borrowers are delivering projects as agreed. According to the 
Executive Director, the program will use engineering expertise to help 
monitor projects under certain circumstances, such as during the 
construction of manufacturing facilities. However, he explained in his 
comments that the projects for the four loans DOE has made to date are 
in the very early stages of engineering integration--at drafting 
tables and on computers--and therefore such expertise has not yet been 
required to monitor them. We disagree. That the work may be in its 
early stages does not diminish the need for independent engineering 
expertise. In fact, the ATVM program's procedures state that 
engineering integration and construction activities require heightened 
technical monitoring, and, as DOE officials have previously told us, 
independent engineering expertise is an important aspect of such 
monitoring--particularly since ATVM staff expertise is largely 
financial, rather than technical. Moreover, three of the four loans 
have one or more projects that have been in the engineering 
integration phase for at least 10 months, and the other loan has at 
least one project that has begun construction--suggesting that DOE's 
assessment of the projects' status may not be up to date. By not 
engaging engineering expertise to aid ATVM staff in monitoring the 
projects, DOE has not taken appropriate steps to become adequately 
informed about the technical progress of the projects. Thus, DOE 
cannot be assured that the projects are on track to deliver the 
vehicles as agreed nor be in a position to require the borrowers to 
make any corrections in a timely and efficient manner. We maintain 
that DOE should accelerate its efforts to engage sufficient 
engineering expertise for monitoring technical aspects of the projects 
as soon as possible. 

DOE also disagreed with our recommendation to develop sufficient and 
quantifiable performance measures for its three ATVM program goals. In 
his comments, the Executive Director stated that the performance 
measures suggested by GAO would greatly expand the scope of the ATVM 
program and do not appear to be consistent with the intent of Congress 
in authorizing the program. However, he did not explain how measuring 
the performance of the program would expand its scope or be 
inconsistent with Congress' intent beyond pointing out that measuring 
performance as we recommended would require research efforts by 
program staff and that Congress did not specify the performance 
measures. Principles of good government, as specified in the 
Government Performance and Results Act, require agencies to establish 
goals for their programs and performance measures that provide a basis 
for comparing program goals with the results. DOE rightly established 
performance goals for the program, which are to (1) increase the fuel 
economy of U.S. passenger vehicles as a whole, (2) advance automotive 
technology in the United States, and (3) protect taxpayers' financial 
interests. Furthermore, as we reported, DOE established two 
performance measures for its first goal--the extent to which the 
average fuel economy of ATVM-funded vehicles has increased over that 
of similar vehicles from model year 2005 and the extent to which the 
vehicles have consumed petroleum in comparison to similar vehicles 
from model year 2005. These performance measures fall short, in part, 
because they address only improvements at the program level and do not 
put those improvements into the broader context of total U.S. 
passenger vehicle fuel economy, which is necessary for assessing 
progress toward the national-level goal. For example, DOE's measure 
for assessing the petroleum saved by vehicles in the program provides 
a first step in determining whether the program is making progress 
toward its national-level goal of increasing fuel economy of U.S. 
passenger vehicles as a whole. However, to put DOE's estimates of 
petroleum to be saved by program vehicles into the context of U.S. 
vehicles as a whole, DOE would need to determine such additional 
factors as (1) the extent to which program vehicles become part of the 
U.S. fleet as a whole, (2) the number of vehicles that the program 
vehicles replace, and (3) the number of miles the new vehicles are 
driven as compared with the miles driven by the vehicles they replace. 
Furthermore, DOE's two performance measures do not isolate the effects 
of the program from other factors. Although this can be difficult to 
do with precision, accounting for the effects of other factors could 
help the agency more accurately determine the effects of the program. 
We note in our report that, because automakers selling cars in the 
United States have to meet increasingly stringent CAFE targets, DOE 
could approximate the effects of the program by measuring the extent 
to which the ATVM-funded vehicles achieve fuel economy that surpasses 
those CAFE targets. However, in his comments, the Executive Director 
stated that DOE will not create new performance measures for any of 
its three program goals. By not setting sufficient performance 
measures for its three program goals, DOE is unable to assess its 
progress in accomplishing them. Assessing the extent to which the ATVM 
program is accomplishing its goals is particularly important given the 
current economic climate and constrained federal budget. DOE's failure 
to develop and use appropriate performance measures means that 
Congress lacks important information on whether the funds spent so far 
are furthering the program's goals and, consequently, whether the 
program warrants continued support. It also means that U.S. taxpayers 
do not know whether they are getting what they paid for through the 
loans. 

DOE's letter commenting on our report is presented in appendix II. DOE 
also provided more details and technical comments, which we 
incorporated as appropriate. 

As agreed with your offices, unless you publicly announce the contents 
of this report earlier, we plan no further distribution until 30 days 
from the report date. At that time, we will send copies to appropriate 
congressional committees, the Secretary of Energy, and other 
interested parties. In addition, the report will be available at no 
charge on the GAO Web site at [hyperlink, http://www.gao.gov]. 

If you or your staffs have any questions about this report, please 
contact me at (202) 512-3841 or ruscof@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. GAO staff who made major contributions 
to this report are listed in appendix III. 

Signed by: 

Frank Rusco: 
Director, Natural Resources and Environment: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

To identify the steps the Department of Energy (DOE) has taken to 
implement the Advanced Technology Vehicles Manufacturing (ATVM) Loan 
Program, we analyzed relevant provisions of the Energy Independence 
and Security Act of 2007 (EISA) and the Consolidated Security, 
Disaster Assistance, and Continuing Appropriations Act, 2009; the ATVM 
program's 2008 interim final rule; the ATVM program's credit policies 
and procedures manual; and other documentation provided by DOE. We 
discussed the interim final rule and program implementation with 
officials from the ATVM program; the Office of Energy Efficiency and 
Renewable Energy; the Office of the Secretary of Energy; the Office of 
the Chief Financial Officer; and the Credit Review Board, which is 
charged with overseeing the ATVM program and making recommendations to 
the Secretary of Energy on whether or not to award loans. We also 
compared the interim final rule with applicable requirements contained 
in EISA and the Office of Management and Budget Circular A-129, 
Policies for Federal Credit Programs and Non-Tax Receivables. 

To examine the ATVM program's progress in awarding loans, we analyzed 
documents DOE decision makers used to select borrowers; minutes of 
Credit Review Board meetings; the loan agreements made as of February 
24, 2011, and other relevant documents. We also interviewed cognizant 
DOE and ATVM officials to gain further information on the loans. We 
did not evaluate the technical or financial soundness of the projects 
that DOE considered for loans. 

In addition, we compared the program's fuel economy estimates for the 
funded vehicles with (1) the average fuel economy of the comparable 
vehicle class for model year 2005 and (2) data on future CAFE targets. 
For each vehicle project that has received funding from the ATVM 
program, we compared the miles per gallon (mpg) or miles per gallon of 
gasoline equivalent (mpgge) result from DOE's Powertrain System 
Analysis Toolkit (PSAT) model for the representative vehicle used to 
establish the project's eligibility to the average mpg for the 
comparable vehicle class for model year 2005 as defined under ATVM's 
interim final rule. We also compared the mpg or mpgge result from 
DOE's PSAT model, which is a single mpg rating for a particular model 
year, with the mpg target under corporate average fuel economy (CAFE) 
standards for a vehicle with the same footprint in the same model 
year. We did not compare the estimated mpg or mpgge to CAFE targets in 
years subsequent to the first year of expected production for that 
model. We determined that these data were sufficiently reliable for 
our purposes. 

To assess how the ATVM program is overseeing the loans, we analyzed 
the ATVM program's credit policies and procedures manual, the 
program's credit monitoring plans for borrowers, borrowers' progress 
reports, and the external auditors' reports available for the three 
borrowers who have had external audit reports as of September 16, 
2010. In addition, we discussed loan oversight and monitoring with 
officials from the ATVM program and the Office of Energy Efficiency 
and Renewable Energy. Finally, we consulted GAO's Standards for 
Internal Control in the Federal Government. 

To evaluate the extent to which DOE can assess its progress toward 
meeting program goals, we analyzed relevant provisions of EISA, DOE's 
budget request documents, and other documentation provided by the ATVM 
program. We also analyzed relevant provisions of the Government 
Performance and Results Act (GPRA), as well as our prior work on GPRA 
and federal standards for internal control. Finally, we discussed 
strategic planning and program implementation and evaluation with 
relevant ATVM officials. 

We conducted this performance audit from September 2009 through 
February 2011 in accordance with generally accepted government 
auditing standards. Those standards require that we plan and perform 
the audit to obtain sufficient, appropriate evidence to provide a 
reasonable basis for our findings and conclusions based on our audit 
objectives. We believe that the evidence obtained provides a 
reasonable basis for our findings and conclusions based on our audit 
objectives. 

[End of section] 

Appendix II: Comments from the Department of Energy: 

Department of Energy: 
Washington, DC 20585: 

February 2, 2011: 

Mr. Frank Rusco: 
Director, Natural Resources and Environment: 
Government Accountability Office: 
Washington, DC 20548: 

Dear Mr. Rusco: 

Thank you for the opportunity to comment on the Government 
Accountability Office's (GAO) draft report on the Department of 
Energy's (DOE or Department) Advanced Technology Vehicles 
Manufacturing Incentive Loan Program (ATVM), Advanced Technology 
Vehicle Loan Program Implementation Is Underway but Enhanced Technical 
Oversight and Performance Measures Are Needed. 

The Department is pleased that the GAO recognizes the progress of the 
ATVM program in making $8.4 billion in loans that will yield fuel 
economy improvements in the near and long-term while creating or 
saving an estimated 37,800 jobs. ATVM loans are fostering the 
development of a variety of advanced automotive projects including 
those that offer improved internal combustion technology as well as 
those utilizing electric and hybrid technologies. 

DOE is very proud of the fact that the program was set up in record 
time. Authorized under Section 136 of the Energy Independence and 
Security Act of 2007 (P.L. 110-140) (EISA), the program was not funded 
until the Fiscal Year 2009 Continuing Resolution was approved by 
Congress in October 2008. On November 5, 2008, DOE issued the Interim 
Final Rule in approximately half of the 60-day expedited timeframe 
mandated by Congress. The ATVM program has been enthusiastically 
received by the automobile industry. Over 130 applications for nearly 
290 projects have been submitted to the ATVM program. These 
applications have come from both automobile manufacturers and 
component makers. It is also important to note that the funding 
provided by ATVM came at a critical time in the development of plug-in 
hybrid and electric vehicles providing long-term capital for these 
efforts when private financing was not available. 

As noted in your report. the Department has taken numerous steps to 
successfully implement the ATVM program. The Department set three 
goals: increase the fuel economy of U.S. passenger vehicles as a 
whole, advance U.S. automotive technology, and protect taxpayers' 
financial interests. DOE also set technical, financial, and 
environmental eligibility requirements. Additionally. DOE established 
criteria for judging the technical and financial merits of applicants. 

A paramount concern is protecting the American taxpayer. To that end, 
the ATVM program undertakes a rigorous screening for technical merit, 
financial viability, including a thorough credit underwriting of the 
project, and then negotiates a commitment term sheet. The project then
enters the approval process which, if successful, leads to negotiation 
of a loan agreement. After closing loans, the Department monitors the 
financial conditions of borrowers through comparisons of actual 
performance to the established financial covenants and other key terms 
and conditions associated with the loan to ensure taxpayers are 
protected. 

GAO's report makes two recommendations. With respect to the first, DOE 
agrees that engineers should be engaged to monitor certain aspects of 
ATVM loans as part of a comprehensive monitoring program, and in fact, 
the Loan Programs Office has already engaged independent engineers to 
review certain aspects of ATVM applications. DOE takes exception with 
GAO's assertion that all Our outstanding ATVM loans made to date 
should have had independent engineers reviewing initial stages of 
engineering integration work. This is done primarily at drafting 
tables or on computers and as such would be difficult to appraise. 
Engaging engineers at this stage would likely not yield the insights 
which would increase effectiveness of the ATVM program. DOE engineers 
will provide more extensive oversight of start-up companies including 
monthly on-site inspections. However, DOE believes that established 
original equipment manufacturers which have large staffs of highly 
experienced engineers and other experts require less frequent 
inspection unless there is a problem achieving performance 
specifications of new vehicles or in case there are manufacturing cost 
issues. DOE will utilize engineering expertise on a regular basis 
during the construction of all vehicle assembly and component 
manufacturing facilities supported by ATVM loans. 

With respect to the second recommendation regarding performance 
measures, DOE believes that the ATVM program has faithfully adhered to 
the requirements of the EISA as more fully developed in its 
implementing regulations. Performance measures suggested by the GAO 
greatly expand the scope of the program and do not appear consistent 
with the intent of Congress in authorizing this program. We do not 
intend for the program to create new performance measures that 
Congress did not specify. Furthermore, isolating the contribution of 
the ATVM program by taking into account the numbers and types of ATVM 
vehicles that consumers might have bought, the numbers and types of 
vehicles consumers have replaced, and the extent to which the new 
vehicles have been used by consumers relative to the old vehicles as 
GAO suggests would require a significant research effort which would 
divert resources and produce no benefit. 

Enclosed are the Department's detailed response to GAO's specific 
recommendations and separate technical and factual comments on 
specific language in the draft report. We look forward to working with 
your team on future engagements. 

Sincerely, 

Signed by: 

Jonathan M. Silver: 
Executive Director: 
Loan Programs Office: 

Enclosures: 

[End of section] 

Appendix III: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Frank Rusco, (202) 512-3841 or ruscof@gao.gov: 

Staff Acknowledgments: 

In addition to the individual named above, Karla Springer, Assistant 
Director; Marcia Carlsen; Elizabeth Curda; Nancy Crothers; Brandon 
Haller; Joah Iannotta; Terence Lam; Rebecca Makar; Reina Nunez; Madhav 
Panwar; Mick Ray; Ray Sendejas; Kiki Theodoropoulos; and Barbara 
Timmerman made key contributions to this report. 

[End of section] 

Footnotes: 

[1] In Section 136 of EISA, Congress also authorized the ATVM program 
to make grants, but to date, this has not been funded. 

[2] Credit subsidy costs exclude administrative costs and any 
incidental effects on governmental receipts or outlays. Present value 
is the worth of the future stream of returns or costs in terms of 
money paid immediately. In calculating present value, prevailing 
interest rates provide the basis for converting future amounts into 
their "money now" equivalents. 

[3] EPA is responsible for developing and executing CAFE testing and 
calculation procedures. NHTSA uses EPA data to determine if a 
manufacturer's fleet is in compliance for a given model year. The 
final rule was published in the Federal Register on May 7, 2010. 

[4] GAO, Effectively Implementing the Government Performance and 
Results Act, [hyperlink, http://www.gao.gov/products/GAO/GGD-96-118] 
(Washington, D.C.: June 1996). 

[5] GAO, Standards for Internal Control in the Federal Government, 
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1] 
(Washington, D.C.: November 1999). 

[6] The Federal Financing Bank is a government corporation, created by 
Congress, under the supervision of the Department of the Treasury. 

[7] The government's cost of funds is the interest cost that the 
federal government must pay for the use of the money it lends to ATVM 
borrowers--that is, the interest rate on Treasury notes at the time 
the funds are disbursed. 

[8] The Federal Credit Reform Act of 1990 requires that the credit 
subsidy costs of federal loan programs be paid; for the ATVM program, 
they are paid by congressional appropriations. 

[9] DOE evaluates proposed projects individually. Applicants may 
submit loan requests for multiple projects in a single application, 
but each proposed project must include all necessary information 
specific to that project. 

[10] The interim final rule defines the "most recent" year as the year 
for which the most recent CAFE compliance data are available. DOE 
defines "adjusted average fuel economy" as the average of the combined 
CAFE fuel economy ratings--adjusted by production volume--of all the 
relevant vehicles in a manufacturer's vehicle fleet. 

[11] The federal prevailing wage requirements, commonly known as Davis-
Bacon requirements, are codified at 40 U.S.C. §§ 3141-3148 and apply 
to borrowers, contractors and subcontractors. 

[12] Pub. L. No 110-140, § 136(a), 121 Stat. 1492, 1514 (2007), 
codified at 42 U.S.C. § 17013. 

[13] To determine the expected fuel economy of proposed vehicles, DOE 
laboratory staff analyze applicant-provided data on the specifications 
of a proposed vehicle using the Powertrain System Analysis Toolkit, 
which DOE uses as its primary fuel-efficiency simulation tool for a 
number of vehicle-related projects. 

[14] Manufacturers may produce multiple versions of a model within a 
project that have varying technical specifications--that is, for a 
sedan model, manufacturers might plan to produce versions with 
automatic and manual transmissions that vary in their fuel economy. 

[15] Under NEPA, federal agencies evaluate the likely environmental 
effects of projects that are proposed using an environmental 
assessment or, if projects are likely to significantly affect the 
environment, a more detailed environmental impact statement. See 42 
U.S.C. §§ 4332(2)(C), (E). 

[16] The ATVM program's credit rating for applicants is based, in 
part, on any publicly available credit ratings. 

[17] Prior to the review by the Credit Review Board, the Credit 
Committee--a group composed of the Director of the Loan Guarantee 
Program and senior staff of the Chief Financial Officer's Office-- 
reviews the financial analysis and makes recommendations to the 
Director of the ATVM program and the Credit Review Board on whether to 
award loans. 

[18] Loan amounts awarded to each company do not add up to the total 
loan amount the ATVM program awarded to date because of rounding. 

[19] The CAFE standards for 2012 to 2016 will subject passenger cars 
and light trucks to target levels of fuel efficiency based on the 
vehicles' "footprints." A vehicle's footprint is a measure of its size 
calculated by multiplying its wheelbase (the distance from the center 
of the front wheels to the center of the rear wheels) by its average 
track width (the average of the width between the two front wheels and 
the width between the two rear wheels). The vehicle-level mpg targets 
generally become more stringent with each new model year. 

[20] We calculated harmonic averages, which are often used for 
determining the average of a set of rates, such as, in this case, 
mpgs. DOE used harmonic averages to calculate the combined average 
fuel economy for its vehicle classes under the ATVM interim final rule. 

[21] For the purpose of establishing eligibility, DOE used the 
classifications in the interim final rule. According to Fisker 
officials, while these classifications accurately reflect the 
vehicles' footprints and are appropriate for judging the fuel economy 
of the vehicles, the classifications do not accurately reflect the 
type of vehicles to be produced by Fisker under the program. More 
specifically, the officials characterized the Karma as a "premium-
luxury sedan" and the Nina as a "near-luxury performance sedan," 
noting that vehicles that are known in the industry as "subcompacts" 
generally are not luxury vehicles. 

[22] Nissan officials told us that the LEAF that will be produced will 
be a midsize sedan, differing slightly from the design classified by 
DOE as a small wagon that was used to establish eligibility. DOE's 
projected fuel economy for the LEAF also exceeds the eligibility 
requirements for the midsize sedan classification. 

[23] Nissan has announced that EPA has approved a fuel economy window 
sticker for the LEAF for model year 2011 with a rating of the 
equivalent of 99 miles per gallon of gasoline equivalent (mpgge), 
resulting from the five-cycle testing regimen EPA is using until it 
makes final its regulation. 

[24] For sales occurring after December 31, 2009, the cost to 
consumers of plug-in hybrid vehicles and all-electric vehicles is 
reduced by a federal tax credit ranging from $2,500 to $7,500, 
depending on the battery capacity of the vehicle. The credit begins to 
phase out for a manufacturer after it has sold at least 200,000 
qualifying vehicles for use in the United States. 

[25] See GAO, Federal Energy and Fleet Management: Plug-in Vehicles 
Offer Potential Benefits, but High Costs and Limited Information Could 
Hinder Integration into the Federal Fleet, [hyperlink, 
http://www.gao.gov/products/GAO-09-493] (Washington, D.C.: June 9, 
2009). 

[26] The credit rating was determined by Standard and Poor's. 

[27] GAO, Agencies' Annual Performance Plans under the Results Act: An 
Assessment Guide to Facilitate Congressional Decisionmaking, 
[hyperlink, http://www.gao.gov/products/GAO/GGD/AIMD-10.1.18] 
(Washington, D.C.: February 1998) and GAO, The Results Act: An 
Evaluator's Guide to Assessing Agency Annual Performance Plans, 
[hyperlink, http://www.gao.gov/products/GAO/GGD-10.1.20] (Washington, 
D.C.: April 1998). 

[End of section] 

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