After the Department of Energy announced this week it had given up on not-bankrupt-but-should-be Fisker Automotive, and will auction off its loan for a pittance, you’d think (and hope) Congress would have had enough of this kind of thing. Senator John Thune certainly has.
“The Obama administration has gotten into the business of picking winners and losers at a significant cost to taxpayers,” said the South Dakota Republican yesterday. “I’m calling for the Senate to consider my amendment to eliminate the wasteful ATVM loan program and for my colleagues to join me in protecting taxpayer dollars from any future risky green energy investments.”
ATVM stands for “Advanced Technology Vehicles Manufacturing,” but Fisker’s allegedly advanced technology vehicle – the once and often hyped Karma – hasn’t been manufactured for over a year. Nor is Vehicle Production Group, another failed ATVM recipient, producing any handicapped vans that run on compressed natural gas – like they and DOE said they would.
Fisker was originally granted a $529 million loan and received $193 million before DOE halted payouts due to lack of compliance with the terms of the agreement. The agency collected a few more dollars after the company went inactive, and now $168 million is still due. Fisker officials have tried desperately to find someone who will actually pay money for their dead company, to no avail. Vehicle Production Group was loaned $50 million and after its auction, DOE collected $3 million for taxpayers, so expectations are extremely low for the Fisker auction.
“After exhausting any realistic possibility for a sale that might have protected our entire investment,” said Peter Davidson, executive director of DOE’s Loan Program Office, “the department announced today that we are auctioning the remainder of Fisker’s loan obligation, offering the best possible recovery for the taxpayer.”
Davidson’s announcement was couched in a larger apologia for President Obama’s “Green” stimulus initiative. DOE employed a similar tactic for Abound Solar’s June 2012 bankruptcy, when deputy director of Public Affairs Damien LaVera wrote a lengthy article that defended the agency’s “investments” in solar energy. But rather than put the Fisker failure in context of the overall list of Recovery Act failures (Heritage has compiled a long list) – among them Abound, Fisker, VPG, Ecotality, A123 Systems, Beacon Power, Ener1, Evergreen Solar, and of course Solyndra – Davidson instead painted a picture of the president saving the auto industry, of which Fisker was supposedly an aberration.
Davidson, desperate to put a happy face on the Green agenda, even cited the unpopular bailouts of General Motors and Chrysler to put the Fisker catastrophe in favorable perspective.
“When the President took office,” Davidson wrote, “America’s auto industry was on the brink of collapse. With hundreds of thousands of jobs on the line, the President made the difficult decision to provide support to GM and Chrysler on the condition that they make the sacrifices necessary to fundamentally restructure and commit to tough-minded plans to return to viability.”
The former New York state economic developer delivered four full paragraphs of ostensible Obama heroics for the auto industry before his first mention of Fisker.
“The Department of Energy is playing an important role in this global competition, partnering with America’s auto industry as it works to innovate and retool for the future. For example, the Department has issued $8.4 billion in loans to auto manufacturers large and small who are adopting cutting edge technologies and deploying them into the market.”
And echoing the claims of LaVera and his predecessor leading the loan program, Jonathan Silver, Davidson produced a nine-row chart that showed the $800 million in loan losses represented only 8 percent of the $10 billion Congress set aside for potential program losers.
It is upon this flimsy foundation that new Energy Secretary Ernest Moniz has announced that he wants to revive the comatose ATVM program. This was despite a March report produced by the Government Accountability Office that said a large contingent of potentially eligible candidates were avoiding DOE’s loan programs, because of concerns about bureaucratic red tape and the expenditure of time and resources for an uncertain outcome as obstacles. But above all many electric vehicle entrepreneurs were deterred by bad publicity surrounding DOE’s loans, which nullifies the administration’s claim that Obama’s stimulus initiatives have been a success.
“Some applicants noted that the Solyndra default and other problems have created a negative public image and political environment for the program,” said Frank Rusco, GAO’s director for Natural Resources and Environment, to the House and Senate’s Appropriations subcommittees on Energy, “which has made its future less certain and DOE more cautious about closing on loan guarantees.”
This is in addition to the DOE’s own Inspector General saying that the EV charging program implemented through bankrupt Ecotality was poorly implemented and accounted for, which is the norm for government-driven operations.
My NLPC colleague Mark Modica has done a stellar job debunking the administration’s claims about how it saved the auto industry – especially GM – and how the bailouts instead saved Obama’s union cronies at the expense of the company’s investors. He has also detailed how that relationship was leveraged by the president to (in part) drive GM to pursue the aggressive development and promotion of electric cars such as the Volt. Meanwhile taxpayers took it on the chin as the GM shares bought by the government will come nowhere close to their value when they are expected to be sold soon.
Similarly so also does the complete context – and not just the loan programs, which are bad enough – of Obama’s green “investments” with taxpayer money undermine the propaganda that DOE delivers regularly to the public.
With Fisker, thanks to illusory promises and rhetoric about its future from the administration, there was collateral damage. After Vice President Joe Biden announced the company would manufacture vehicles in a former GM plant in Delaware, the state anted up its own incentives and covered some of the utility bills for the facility. The state is likely out more than $20 million, and because Fisker owns the property but is not paying, things like local tax bills are going unpaid and are undoubtedly affecting budgets for schools and services.
Perhaps the most sobering truth about the Fisker saga comes from EV industry cheerleading site Gigaom.com, which said that the optimistic valuation of the company a few months ago was $20 million.
“If true,” the site noted, “$20 million is less than one percent of its reported $2.2 billion valuation back when it launched the Karma in the late summer of 2011.”
A clear lesson that hype about government endorsements and monetary support for business are often fleeting. It should be a cautionary tale for those who still get excited about DOE’s “successes” from the ATVM program, like Tesla Motors, which is presently valued at $20 billion.
Paul Chesser is an associate fellow for the National Legal and Policy Center and publishes CarolinaPlottHound.com, an aggregator of North Carolina news.