It is unfortunate, but that was the only way Generics could ship at the time in a backwards compatible way. But I don’t think it is fair to call it awful, especially knowing the context. Also, when it does show up as a performance bottleneck, it is trivial to fix.
If generics had had to actually support ArrayList<int>, they would have required significant changes to how ArrayList is stored in memory, and to how a lot functions which work with generic types are actually compiled. Instead, Java has the easy path in the implementation: since everything only works with reference types, there's no need for multiple copies of a function to work with different types.
Of course, this means that sum<Integer>(new Integer[1000000]) is going to be orders of magnitude slower than sumInts(new int[1000000]).