This post has been updated below.
Among the objections about taxpayer subsidies for the high-profile Chevy Volt, manufactured by Government Motors, is that the many grants, loans and tax breaks that lowered the sticker price on the electric hybrid car facilitated its (paltry) sales for the benefit of wealthier individuals who were purchasing it – those with average annual salaries of $170,000. So can you imagine how happy the affluent customers (like Leonardo DiCaprio) of the heavily subsidized, $102,000 electric Fisker Karma are, to be able to purchase their gimmicky sports sedan at a discount, with a $7,500 tax credit to boot?
Undoubtedly they are much happier than the 65 poor souls that Fisker just laid off. Will there be more?
Passing it off as “a bump in the road,” company spokesman Roger Ormisher chalked up the cutbacks to the difficulty in starting a new car company and what would appear to be trivial missed deadlines and sales targets. But Fisker, already the recipient of $193 million of a total $529 million loan from the Department of Energy – not to mention a reported $850 million in private investment – shows disconcerting signs of incompetence and poor stewardship with the resources it’s been trusted with.
So far the $193 million has been allocated mostly for the production of the Karma – therefore it can be deduced that taxpayers have subsidized a six-figure status symbol for the wealthy. The car serves no practical purpose, but instead provides “wow-factor” fodder for discussion at cocktail parties. According to Fisker, the company had 650 people toiling away at its headquarters in California (before 40 or so were laid off), plus another 125 that were refurbishing a former General Motors plant in Delaware (where 26 were laid off).
Something seems askew with the numbers, however. Fisker has said “not a single dollar of the DOE loans has been, or will be, spent outside of America” – an assurance that PriceWaterhouseCoopers is allegedly tracking for DOE. But the Karma is assembled at Valmet Automotive in Finland, so if the $193 million has been mostly spent on that project (as Fisker said in an official statement put out on Monday), how could at least a significant portion of that money not have been spent overseas? And if it wasn’t, then the evidence looks even worse. Consider:
· $193 million divided by 775 U.S. jobs equals about $250,000 per job that American taxpayers have paid to subsidize Fisker to design and engineer its luxury electric hybrid
· Only “between 200 and 300” (says USA Today) Karmas have been delivered to the U.S. market – under the most optimistic scenario, that’s a $643,333 DOE subsidy per vehicle produced
· Fisker laid off 26 of the alleged 125 employees working at the Delaware plant, but activity there has been “halted” – so are the other 99 being paid to do nothing?
· DOE is reportedly withholding the remaining payout of the loan because Fisker “missed milestones” in getting the Karma to market – approximately three months later than scheduled. Is tardiness of 90 days seriously the only reason DOE is reluctant to issue more money to Fisker?
· The layoffs and Delaware stoppage are allegedly for Fisker to “conserve cash” as it tries to renegotiate with DOE the terms of the remaining $336 million of its loan. If reports are true, then Fisker has had $1.05 billion at its disposal (private, DOE and Delaware funding) to get the Karma designed and launched and prepare for its next car, “Project Nina,” the planned $50,000 family sedan. Where is the money going?
The troubling news doesn’t stop with Fisker. In December its battery supplier, A123 Systems, was forced to lay off 125 of its own employees at its plants in Michigan due to Fisker’s production delays last year. In addition to its vendor relationship, A123 is also an investor in Fisker according to its SEC filings, having poured $20.5 million in cash and stock equity into the company.
“We have a supply agreement with Fisker pursuant to which we are providing Fisker with advanced automotive battery systems over a multi-year period,” A123 reported in the 3rd quarter last year. “If Fisker is not successful in raising additional capital necessary to fund its operations, executing on its strategic plan or does not meet the anticipated demand for our products, our revenues and profitability may be materially impacted.”
So it’s clear that A123’s fortunes are closely linked to Fisker’s, much in the way that bankrupt Indiana battery-maker Ener1 was tied to (or dependent on) Norwegian electric carmaker Think Global, itself a repeat failure. Don’t be surprised to hear of more layoffs at A123 in the coming days or weeks. Taxpayer cash is at stake there as well, since A123 has received more than $279 million in stimulus money, in addition to grants and tax credits from Michigan that could total $135 million. A123 suffered net losses of $85.8 million in 2009 and $152.6 million in 2010.
Worse, the public money that supports Fisker and A123 represents crony venture socialism (don’t call it capitalism) at its worst. Kleiner Perkins, where former Vice President (and global warming guru) Al Gore is a partner, is heavily invested in Fisker, and executives with the firm have contributed more than $1 million over the last two decades to mostly Democratic candidates and causes. And A123 President and CEO David Vieau is a donor to President Obama and other Democrats, and also helped support the president’s energy and climate legislation by appearing in a promotional video.
What a hopeless, foolish policy designed to accomplish nothing. While cap-and-trade has been averted on a national scale thus far, in its place are redistributionist schemes driven by a long-ago discredited threat from global warming — still a cash cow for climate modelers and alternative energy schemers. So dollars by the billions (trillions?) are transferred from taxpayers to purchasers of a meaningless few electric vehicles that will have no impact on emissions or climate.
And besides massive subsidies that dramatically reduced the price of vehicles like the Karma, Leonardo DiCaprio is also eligible for a $7,500 tax rebate to add to his limited-range enjoyment. Crazy.
Update 11:45 a.m. 2/9/2012: Government watchdog group Judicial Watch announced it has filed a Freedom of Information Act lawsuit against the Department of Energy, for failing to produce records it requested related to the Fisker loan.
From the press release:
DOE acknowledged receiving the FOIA request on November 25, 2011, but did not state when the requested documents would be provided. By law, a response was required by December 23, 2011. As of February 1, 2012, the date of Judicial Watch’s lawsuit, the DOE has failed to release any documents or indicate when documents are forthcoming. The Obama DOE has not claimed that such records are exempt from Judicial Watch’s FOIA request.
“It looks like the Obama administration has another Solyndra mess on its hands, which is why they’re stonewalling the release of records regarding this shady Fisker deal,” said Judicial Watch President Tom Fitton.
Paul Chesser is an associate fellow for the National Legal and Policy Center.