Late last week ABC news published a slanted story about the Dept of Energy loan assistance to Fisker Automotive for production of their Karma and Nina hybrid electric vehicles. The story has been mungled together with the faux outrage over Solyndra’s failure and the general effort to undermine the Obama Administration at all costs. This isn’t the first time right wing ideologues have attacked Fisker, and, as Media Matters pointed out today, the ABC report itself is a rehash of attacks made in 2009. In the wake of the ABC article, the Romney campaign today called for a probe of the loan program while rehashing the ABC article.
To begin with let’s recall that no business plan is gauranteed, and this is especially especially true for start-up car companies. There have been no successful automotive start-up companies in the U.S. in over fifty years, due to the high barriers of entry. Surely everyone must understand that some business investments fail, that both Fisker and Tesla are risky companies that might fail. Why is anyone surprised?
The ABC report makes a number of claims with varying truthiness
- Fisker received $529 million in loan gaurantees, which it used to set up car production in Finland, despite promises that the loan programs would create jobs in America
- The car is so high priced it can only be bought by the ultra rich, like Leonardo Di Caprio (who received the first Fisker Karma produced)
- Raised numerous doubts about the viability of Fisker as well as Tesla based on due dilligence warnings in Tesla’s SEC filings. Both companies are recipients in the Advanced Technology Vehicles Manufacturing (ATVM) Loan Program.
- Connected the recent failure of Solyndra with the theoretical failure of Tesla and Fisker
It was always known that the Fisker Karma would be built in Finland. This non-news was trumpeted heavily in the ABC article as a condemnation of the loan process, and Romney uses it to harp on supposed barriers to competitiveness due to union bosses and government rules. In fact the plan is and always was for the US-designed Karma to be built at the Valmet plant in Finland, and for the Fisker Nina to be manufactured at a former GM automobile factory in Delaware. The Karma and the Nina are two different cars, and Fisker plans more car designs in the future.
A U.S.government loan to an American-based company that then outsources manufacturing to Finland is worthy of questions, but is not new information. For their part Fisker has always maintained
- it used loan program funds inside the U.S.,
- that costs not covered by the Federal loan are instead covered money raised from private investors (totalling over $600 million),
- that future vehicles would be built in the U.S.
- and that they had difficulty locating a “contract auto manufacturer” to build the Karma.
Valmet is one of the few contract auto manufacturers left in the world. As founder Henrik Fisker said, “There was no contract manufacturer in the U.S. that could actually produce our vehicle. They don’t exist here.” Rather than complain the Karma isn’t being produced in the U.S., maybe this as evidence of the need for domestic electric vehicle manufacturing capability.
With a base sticker price of $97,000 this car is not for the average family, but it’s also not so high priced that only the ultra-rich can buy it. The success of Tesla Motors, another ATVM recipient, in selling about 2000 of their iconic Roadsters at prices well above the $97,000 Karma base price is proof the market for high priced electric cars does exist. Further the Tesla business plan is to keep driving the price down with each new vehicle generation, and indeed they expect to sell the Model S with a $57,400 base price. Fact is it’s easier to launch a small startup automotive company at the lower manufacturing volume for expensive cars, than it would be to launch it at the high manufacturing volume required for less expensive cars.
There is a worthy question here about which companies and vehicles should be supported by the Dept of Energy loan program. The ATVM program had many applicants who haven’t been approved to receive money. This is a sign the DoE is evaluating the worthy companies, which is commendable. Some, incuding Romney today, question the wisdom of the government “picking winners and losers” by giving loans or grants to chosen companies.
The U.S. government has been giving grants and loans to companies, picking winners and losers, for decades. There’s nothing new about that, so why was there no outcry before? The ATVM program originated during the Bush Administration, and was meant to speed up developing a domestic industrial base supplying efficient vehicles to the U.S. market. Was there any complaint at that time about the government picking winners or losers? If this is bad in the clean technology segment, then wouldn’t it also be bad in all the other segments where the government does the same?
What we have here is an example of hypocracy, or hypocratic behavior by political leaders. A Think Progress report published yesterday listed several instances of Republican lawmakers who lobbied the Dept of Energy for action on grants or loans in their districts, but who also voted against clean energy grant programs.
It is true that Tesla’s SEC filings are full of warnings about the potential failure of Tesla. Presumably some of the warnings are applicable to Fisker as well because they’re both at the same stage of business development, but because it is a private company Fisker is not required to air its dirty laundry in SEC filings. Tesla has been losing money every quarter since its launch, but this is a start-up company in its early phase before it ramps up significant sales. Tesla has no experience with manufacturing an entire car, and they may fail at something, but they have hired a staff of industry veterans. Over at Fisker, they have a similar but lesser risk because Henrik Fisker himself is an industry veteran who knows a thing or three about car design.
The fact is that it’s expensive to start a new car company. The ABC story portrays this as some deep dark secret they unearthed, when in fact this has been known all along, and is part-and-parcel with the nature of what these companies are doing. Should we be lauding the visionaries who are risking their lives and fortunes in launching these new companies, or deriding the risk they’re taking?
The failure of Solyndra was used to tarnish the Dept of Energy loans program. If Tesla or Fisker or any other clean tech loan/grant recipient were to fail, we assume it would also be used to tarnish the DoE program. The question is whether the tarnishing is (or would be) deserved, or not. Solyndra failed in part because Chinese solar panel manufacturers undercut their prices which we could interpret using the “Sputnik Moment” meme the Obama Administration has reiterated many times. China’s bold moves in clean technologies threatens the U.S. ability to develop to develop domestic companies in this critical industry. Instead of that rational debate, the political atmosphere we’re currently in currently is highly slanted and often fact-free. The clean technology hopes which played a large role in electing Obama are being held hostage by right wing hard-liners who want to destroy Obama’s presidency at all costs.
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