Another year, another investigation into a green-energy company that failed to perform despite massive government funding.
Yesterday, lawmakers in Washington began hearing testimony about the demise of Fisker, an electric car company that has so far failed to make good on Uncle Sam's investment, which came in the form of a $529 million loan from the federal government. The hearing was titled: "Examining the Department of Energy's bad bet on Fisker Automotive."
And what a bad bet it was. After pledging hundreds of millions of dollars to Fisker in 2009, the government halted loans in June 2011 when the car company fell short on production targets for their luxury plug-in vehicle, the Karma. The company planned to produce at least 11,000 by the end of 2011, but sputtered due to delays in regulatory approval and other difficulties. To date, Fisker has sold just 2,000 Karmas worldwide — not nearly enough to start paying back its debts. On Monday, when the company missed a large loan payment, the federal government responded by seizing $21 million from Fisker's accounts.
The hearing is meant to determine if Washington could have predicted these failures, or if Fisker went sour for reasons officials could not have reasonably foreseen.
The carmaker certainly faced challenges, including supplier difficulties, legal hurdles, and simple bad luck. (Fisker lost more than 300 Karmas in a Hurricane Sandy flood.) But the defining problem seems to be that the Karma was essentially a lemon with a $100,000 price tag. The Karma was "so vulnerable to software errors, and the parts used were of such poor quality that eventually I insisted they take the car back and return my purchase price, which they did," Bruce Simon, chief executive of gourmet food retailer Omaha Steaks, told the Wall Street Journal. "It's a real shame, the car itself was beautiful."
Even more embarrassing: A Karma broke down during a test drive for the influential magazine Consumer Reports. "This is the first time in memory that we have had a car that is undriveable before it has finished our check-in process," said Consumer Reports' Tom Mutchler.
Still, some argue that Fisker's problems run deeper than bad parts and weak production. Just like Solyndra, the solar panel-maker that went bankrupt and liquidated in 2011 after blowing an enormous federal loan of its own, the Fisker debacle is provoking all sorts of critiques of the Obama administration's green energy initiatives.
The Journal's Yuliya Chernova and Mike Ramsey suggest it's not Fisker that failed the government, but the other way around. "[Fisker] represents one of the most prominent failures of the government's use of public funds to wean American industry from fossil fuels — and of how that government interest pushed Fisker to reach too far." They continue:
Originally, Fisker wanted to start small. But, says investor David Anderson, the U.S. asked it to think big. '"We can't loan you money to make a low volume car [in Finland],'" he said the U.S. argued. '"But if you wanted to bring forward in time your idea of the small car to be produced here in the U.S.,' then, they'd say 'OK,'" Mr. Anderson said. [Wall Street Journal]
Red State's John Hayward agrees that providing a company with government resources is eventually bad for profitability:
$200 million in precious taxpayer funds — blown by the president who claims he can scarcely attend to the most vital duties of government unless he's given more tax money — to build less than 2,000 cars, 20 percent of which got wiped out by a hurricane.
That's a lot of useless static to pump into the delicate information system of an advanced economy. Genuine demand is exploited for profit; politically-connected, ideologically-generated false "demand" is a sinkhole for wealth that generates little in the way of healthy, permanent employment. [Red State]
Still, as was the case with Solyndra, some argue that Fisker was an outlier, and in no way representative of the Obama administration's green-energy plan as a whole. The New York Times' Bill Vlasic reports:
An Energy Department spokeswoman, Aoife McCarthy, said the loan to Fisker was one of only a handful of 33 clean-energy loans that did not prove successful. She asserted that its problems should not be considered representative of the Obama administration's broader efforts to promote cleaner cars.
"There will always be an element of risk with investments in the most innovative companies," she said. Major automakers like Ford and Nissan received billions of dollars in federal loans to produce electric cars and, so far, have succeeded. A smaller manufacturer, Tesla, has also been able to meet the conditions of its government loans while producing an electric model. [New York Times]