Wednesday, April 24, 2013

Fisker: we scarcely knew ye


Of all the Department of Energy's green loan debacles and there have been many, Fisker stands above even the Solyndra disaster for a combination of audacity and incompetence.

(For previous posts regarding Fisker, please go here)

To quickly recap: Fisker Automotive was to build electric hybrids cars and was approved for $529 million in loan guarantees (more than they requested) from the Department of Energy to do so. Originally, the two models of cars they were to build were going to be in the $50,000-$60,000 range. In short order, that price escalated upwards to the $110,000 range for it's high-end model thus going from hybrid to luxury hybrid.

The cars were to be assembled at a plant in Delaware as part of the justification for this massive loan was that it would create good paying green manufacturing jobs here in the U.S. The only problem was that the Delaware plant never produced a single car, rather the assembly operations had been relocated to... Finland.

If you were thinking that perhaps a stipulation of the loan would be that our tax dollars wouldn't go to pay the salaries of Paavo, Heikki and the rest of the boys over there, you and we are in the same company.

After falling drastically short of production and sales goals (last year, they sold only 900 out of the 48,000 market-wide plug-ins), the cars plagued by mechanical, electrical and software problems and the failure of A123 batteries (yet, another DOE green loan #fail) last year was a harbinger of doom for Fisker and its aptly-named luxury model "Karma".

And on Monday, there was even more bad news for the car company that has not produced a car since last August.

From the New York Times:

The all-but-closed company skipped a large loan payment that was due on Monday, leading the federal government to take the unusually aggressive step of seizing $21 million from the company's cash reserves to begin recouping the $192 million in taxpayer dollars spent on the company's flawed strategy.

Which means, of course, Fisker is still on the hook to U.S. taxpayers to the tune of $171 million.

The fall-out from this extends beyond merely financial as green technology and our wisdom of taxpayer subsidies for green technology takes a P.R. hit:

Some environmental activists worry about the potential ramifications of a Fisker bankruptcy.

"We can't get to where we need to be in electric vehicles without government help," said Dan Becker, head of the Safe Climate Campaign, an advocacy group in Washington.

Mr. Becker, good sir, if $192 million committed out of $529 million promised isn't considered "help", we scarcely know what is and Fisker still managed to bollox things up.

And if the Obama administration has committed tax-payer money to other, more established auto-manufacturers like Ford and Toyota for their EVs without such disastrous results what is the explanation for what happened with Fisker?

From CBS News:

The Obama administration was warned as early as 2010 that electric car maker Fisker Automotive Inc. was not meeting milestones set up for a half-billion dollar government loan, nearly a year before U.S. officials froze the financing after questions were raised about the company's statements, newly released documents show.

An Energy Department official said in a June 2010 email that Fisker's bid to draw on the federal loan may be jeopardized for failure to meet goals established by the Energy Department.

Fisker continued to receive money until June 2011, when the Energy Department halted further funding. The agency did so after Fisker presented new information that called into question whether key milestones - including launch of the company's signature, $100,000 Karma hybrid - had been achieved, according to a credit report prepared by the Energy Department.

The December 2011 credit report said "DOE staff asked questions about the delays" in the launch of the Karma "and received varied and incomplete explanations," leading to the suspension of the loan.

Recall that the Fisker loan was approved in mid-2009 so it only took a year for the warning flags to go up. One year.

If the warning flags were going up that early, it would suggest perhaps that exercising some due diligence at the front end would've revealed that the loan should not have been made in the first place. Just sayin'.

As it stands, and we are being polite, what this represents is a dereliction of duty by Team O in the stewardship of the taxpayers' scratch. There's really no other way to look at it and yet there will be no repercussions for this willful negligence.

Committing tax-payer money to not-yet-market-ready technology is a losing proposition and committing the same to a start-up using that same technology that can't find sufficient private backing is a guaranteed losing proposition.

Unfortunately, Team O won't learn this lesson. The pursuit of currently suspect green technology subsidized by your money is an article of faith embedded in their collectivist religion and for the smartest kids in the classroom picking winners and losers with respect to directing the economy and "creating" jobs is a divine rite not to be left to the whims of market realities. That we should be so fortunate to be blessed by their benevolence and wisdom.

* Perhaps the quintessential image of the Karma. Being towed off the track after breaking down shortly into Consumer Reports test drive of the car. On the bed of that truck, the Karma achieves the greenie dream of a zero emissions vehicle lumbering down the highway at 50 mph.


K T Cat said...

With a $1T+ deficit, $171M is chump change. Amazing, no?

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