Feds cancel $730M loan for Michigan steel project

January 6, 2012 - 9:20 PM

DEARBORN, Mich. (AP) — The U.S. Energy Department won't follow through on a planned $730 million loan to the North American arm of one of Russia's largest steel companies to modernize its Detroit-area plant.

The Detroit News and Detroit Free Press reported Friday that the conditional loan for the Severstal North America project in Dearborn won't be finalized.

Steel company spokeswoman Katya Pruett said Severstal was "deeply disappointed" by the decision. She said the company will review other financing options to move forward with its plans.

About 60 percent of the project has been competed, but the company was waiting on final loan approval to finish it.

The Energy Department didn't detail reasons for cancelling the loan. Department spokesman Damien LaVera said the project has "merit" but not all projects that receive conditional commitments get green-lighted.

"The additional due diligence the department conducts after a conditional commitment is signed is an important part of the process and is vital to protecting the taxpayers," he said.

The conditional approval was criticized by some Republican lawmakers. California Rep. Darrell Issa compared the loan to the government's $528 million loan to solar panel maker Solyndra LLC, which filed for bankruptcy court protection last year.

Detroit-area Democratic Rep. John Dingell urged the Energy Department in a statement not to "turn their back on projects that create in-demand, well-paying jobs like Severstal."

The planned loan to modernize the plant was announced in July. The project was expected to employ around 2,500 construction workers and create 260 factory jobs.

Severstal bought the Dearborn factory in 2004.