The Kansas City electric delivery truck manufacturer, whose actual business negotiates in government grants, tax breaks and other subsidies – rather than a product anyone actually wants to pay for – had announced at the end of September, via its British investor Tanfield Group, that it needed to raise $4.5 million by October 2nd and $10 million by the end of the month. Without the cash infusion, Tanfield said, “the company is likely to be forced to seek protection under US bankruptcy laws or close down its operations.”
Yesterday Tanfield notified its own investors that Smith Electric had “raised a loan” of $2.9 million thanks to help from – as you might guess – a Chinese manufacturer, FDG Electric Vehicles Limited, which already had an ownership stake. The funding is to be converted to Smith common stock, which is hard to imagine is worth much. As for the remaining $7.1 million Smith says it needs, FDG has said it will cover any shortfall in raising it, according to Tanfield.
Who knows whether any more electric trucks will be produced, but first Smith Electric probably has to take care of its landlord. According to the Kansas City Business Journal, Smith owes $543,346 to the city aviation department for space it occupies near the airport. Second in embarrassment only to its inability to consistently produce trucks that customers want to buy, is the fact the company can’t pay its rent.
Usually a business’s top priority, the monthly lease has been a challenge for Smith Electric for a long time. Kansas City Aviation Department CFO John Green told the Business Journal that the company fell behind “a few years back” and negotiated a plan to pay balances that are in arrears, while also keeping up with its current obligation.
“They were able to honor that agreement until April of this year,” Green said. “Since that time, they have been unable to meet either their current or past due amounts.”
He added that as of six months ago Smith had owed $285,684, and has allowed an additional $257,662 to accumulate in addition since then. Green told the Business Journal that since the company arrived (almost since its U.S. inception) in Kansas City in 2009, it has paid the Aviation Department more than $2.6 million overall.
But it’s no wonder why Smith can’t pay its rent; it hasn’t produced anything lately.
“Since Smith Electric leases space within a larger facility and has had little to no production activity over the last few months,” Green said, “there has been little if any cost to the Aviation Department to allow them to remain as we attempted to work with them through their difficulties in hopes of their return to financial viability.”
It isn’t the first time Smith Electric has had production in the U.S. stall due to financial constraints. And as NLPC has documented extensively, the company hobbled into the U.S. from the United Kingdom – where it was a subsidiary of the stumbling Tanfield Group – in the first place. Despite the fact that its stock had “collapsed” on London’s Alternative Investment Market in 2008, and that alleged orders of its trucks could not be verified, the Obama administration gave Smith $32 million within its first year after relocating and reorganizing in the U.S. Nonetheless the company lost $17.5 million in 2009, $30.3 million in 2010, $52.5 million in 2011, and $27.3 million through mid-2012.
It only appears to have gotten worse since. NLPC reported in 2013 that the evidence showed that Smith could not convince customers such as Frito-Lay and Staples to take their electric trucks unless they were almost entirely subsidized. Because its business model pushed the idea of using delivery trucks on short routes in urban settings, plans were announced to locate assembly plants in Chicago and New York, which never materialized because those were also dependent on the availability of local subsidies!
So now, once again, a Chinese company comes in to seize the carcass of another “green” energy company that received millions from the Obama stimulus, funded by American taxpayers. It happened with battery-maker A123 Systems and with Fisker Automotive, and it will happen again with Smith Electric Vehicles when they finally declare bankruptcy. After all, FDG already owns a sizable chunk of it already.
Paul Chesser is an associate fellow for the National Legal and Policy Center and publishes CarolinaPlottHound.com, an aggregator of North Carolina news.