Why did a subsidiary of a Russian steel and mining company, controlled by one of the world’s richest men, receive a low-interest federal government loan to help upgrade a Michigan plant to supply the auto industry?
That’s what House Oversight and Government Reform Chairman Darrell Issa (R-Calif.) is asking Energy Secretary Steven Chu.
In a letter to Chu last week, Issa says that Severstal North America received a $730 million loan under the Energy Department’s Advanced Technology Vehicle Manufacturing Program; the company is a subsidiary of a Russian company led by Alexei Mordashov, who has a net worth of more than $18 billion, according to Issa. Mordashov has close ties to former Russian President Vladimir Putin.
Issa said that Severstal applied for the loan to improve a high-strength steel plant, but that the material to be produced is not in short supply. He added that that before receiving the loan, the company had sold plants in Maryland, Ohio and West Virginia to shift resources to the Dearborn plant and that the company already had decided to proceed with the project.
“Announcements made by Severstal during the loan consideration process indicated that the company had ample means to carry out the project,” Issa said, in his letter. ” Given the immense wealth and power of Severstal’s CEO and the fact that the corporation had already made significant investments in the project, it is surprising that DOE would choose Severstal for a loan meant to spark new businesses and technologies within the automotive industry.”
Issa added that it is unclear whether Severstal even qualified for the loan program.
In announcing the loan to Severstal Dearborn, LLC on July 13, Chu said, “The Severstal project will help make American automakers more competitive as demand for lighter, more fuel efficient vehicles increases. By manufacturing more advanced high strength steel here at home, we rely less on imports and create thousands of new jobs that get people back to work.”
Issa asked Chu for documents relating to the loan application and the approval of the loan and said he wants the answers to his questions by Nov. 3.
Reuters recently reported that the company has struggled since entering the regional steel market.
The Barack Obama administration has ordered a review of all Energy Department loan programs, as a result of loans the department made to Solyndra, a solar energy company that has failed. Former Treasury official Herbert Allison, who oversaw the Troubled Asset Relief Program, is heading that review.
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