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Nissan Closes $1.4B DOE Loan for Electric Car Plant

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Department of Energy chief Steven Chu has just announced that the agency and Nissan (s NSANY) have closed a $1.4 billion loan agreement that will be used to retool a Smyrna, Tenn., plant, where it will build its upcoming electric LEAF sedan as well as batteries for the vehicle. Today’s announcement, which comes six months after Nissan first won a conditional $1.6 billion loan agreement for the vehicle and battery projects, marks the third agreement to reach this stage under the DOE’s highly competitive Advanced Technology Vehicles Manufacturing — or ATVM — program.

We got a heads-up yesterday that Secretary Chu would be making an announcement about the $25 billion green car loan program, which has already awarded loans on a conditional basis to plug-in hybrid vehicle startup Fisker Automotive and parts maker Tenneco, and finalized loan agreements with Tesla Motors and Ford (s F) — and now Nissan. But for other outstanding applicants, many of which are facing a potential cash crunch for their manufacturing plans, the wait continues.

The DOE brought former venture capitalist Jonathan Silver on board as executive director of the ATVM program (and also the green car loan guarantee program) last year, with the idea that he would help “strengthen and streamline” the agency’s operations. As he heads into his third month at the post, the clock’s ticking on that streamlining effort. Having awarded some $8 billion to Tesla Motors, Nissan and Ford in June 2009, only two conditional loan commitments totaling $552 million have been made in the half-year since then.

Splitting up the $25 billion in ATVM loans among the most deserving companies is a monumental task for application reviewers, and over the long term it will likely be better for the green car industry if the DOE takes whatever time necessary to make the strongest bets on winners and losers. Rushing to dole out cash, and potentially funding weaker projects out of haste might help some firms in the short term, but if they fail to deliver on promises it could create skepticism and disillusion among consumers for an otherwise promising technology and industry.

Depending on how long the evaluation and negotiation process takes, however, delayed decisions could leave some cash- and time-crunched companies by the wayside. For applicants that don’t already have a realistic Plan B in their back pocket, now’s the time to develop one.

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