Mark it down: the report this month about the shutdown of Vehicle Production Group – beneficiary of a $50-million stimulus loan from the Department of Energy – means the Advanced Technology Vehicles Manufacturing initiative within the Loan Program Office has been a thorough failure.
All five ATVM recipients, awarded a total of $8.4 billion of taxpayer-backed financing under the Recovery Act, have earned derision to some degree. Most fit into the already much-ridiculed electric vehicles program. VPG was funded to produce wheelchair-accessible passenger vehicles that ran on compressed natural gas.
The recipients range from the start-ups (Fisker Automotive, Tesla and VPG) to the established (Ford Motor Company and Nissan). The highest-profile flop, by far, has been Fisker, with its single $102,000-plus electric model built for wealthy California elites that couldn’t muster a stronger review from Consumer Reports than “the fourth-worst luxury sedan” on the market, among many other problems. The taxpayer beneficiary of $192 million now teeters on the edge of bankruptcy, and now non-electric VPG has blamed its own downfall on the Fisker fiasco fallout.
According to Business Insider Australia, VPG CEO John Walsh said fear caused by bad publicity and Congressional scrutiny of Fisker led DOE to impose greater restrictions on his company. The news site said VPG raised $400 million in private equity in addition to the DOE loan, and like other recipients was required to keep a certain level of cash in reserve. Walsh said when VPG dropped below that amount, DOE froze its assets, which forced it to stop operations and lay off its employees. Still, he insisted the business was healthy, with a few thousand vans sold and thousands more ordered from customers.
“I think the DOE has made a major error with this company because of the pressures of the Fisker situation, and that is unfortunate,” Walsh said. “It has everything to do with Fisker.”
So the electric vehicle businesses – and those that supply it, such as battery makers – were not the only ones who have struggled. They also caused collateral damage by virtue of the fact they shared the same tainted DOE loan program. At a House hearing last month, Republican members of the Oversight and Government Reform Committee slammed the judgment of ATVM loan officials who decided to finance Fisker.
“They had a triple C rating, they’re under collateralized, they can’t meet payroll, and now we’re surprised?” said Rep. Jim Jordan of Ohio. “All the evidence points to that they should never have gotten the loan in the first place.”
Ironically Walsh echoed much of the Congressmen’s sentiments, despite VPG’s own questionable qualifications for an ATVM loan.
“Fisker is an electric sports car,” he said. “Who needs an electric sports car, other than Justin Bieber?”
“There is a need for what we build,” he added, “and not a need for an electric sports car.”
Walsh’s point is understandable in relative terms, but the claim that there is a “need” for vans for handicapped people that run on CNG is also absurd. Yet a conjured-up “need” for vehicles that run on non-fossil fuels (although where do they think most electricity comes from?) was the Obama administration’s justification for aggressively developing the ATVM program through the stimulus.
Again, each loan recipient has either failed, or did not need taxpayer support, or both. And the established automakers (Ford and Nissan) that accepted the loans showed little evidence that they used the funds for its intended purpose. The others besides VPG:
1. Fisker Automotive. It’s been written to death. Besides the Consumer Reports review (which included the test car breaking down at CR’s facility), there have been fires, recalls, layoffs, frequent CEO changes, unethical behavior by its venture capital firm, an investor lawsuit, and suspected cronyism.
2. Tesla Motors. President/CEO Elon Musk Tweeted earlier this week the company would fully repay its $465 million loan from DOE, likely this week, which some in the media are trumpeting as an Obama “green win.” If the measurement for the administration’s success is that a company didn’t go belly-up like Solyndra, Abound Solar, A123 Systems, etc., then congratulations – here’s your trophy.
In reality, especially in light of the struggles experienced by Fisker and the bankrupt companies, it’s obvious that Tesla never needed the money in the first place. The wildly successful billionaire mogul Musk, with entrepreneurial roots in PayPal and as CEO of SpaceX, undoubtedly could have shifted some of his personal fortune around and easily taken care of the debt. But reports have said that Tesla sold more stock to raise capital – a reported $1 billion.
On the performance front, Tesla has avoided the many pitfalls that Fisker experienced. But it’s still too early to call the EV company and its costly Model S a success. The recent widely publicized announcement that the company was finally profitable was attributable to the fact that Tesla could take advantage of selling California emissions credits to other auto companies whose fleets don’t comply with the state’s stringent emissions standards.
Meanwhile Musk and friends, like everyone else in the industry, have not conquered the obstacles of expense, driving range and recharging times to a level where they are on par with gas-powered vehicles. The broader success of the EV industry also is dependent on the deployment of charging infrastructure and battery technology improvement, both of which are still heavily subsidized by taxpayers.
And the disastrous review of the Model S delivered by the New York Times’s John Broder, in which he suffered much range anxiety and a towed-away car, set off a firestorm of exchanges in the media from which Musk is still trying to recover. All these factors mean the ultimate fate of Tesla is still undetermined, but even if Tesla thrives long-term, it won’t be because of the ATVM program.
3. Ford Motor Company. The automaker that has been proud to claim that it didn’t take bailout money like its fellow U.S.-based competitors, General Motors and Chrysler, instead accepted a $5.9 billion loan guarantee from the ATVM program. Ford and its partners at DOE claimed the financing made possible the conversion of “nearly 33,000 employees to green manufacturing jobs,” with an alleged 509,000 (presumably gas-powered) cars “off the road” and 2.38 million tons of carbon dioxide avoided. This miraculously occurred with Ford’s refurbishment of a few manufacturing plants.
The rollout of its first plug-in, the Focus Electric, was done so less-than-enthusiastically. Rather than a robust campaign to promote the new vehicle and its technology (like GM did with the Chevy Volt), instead Ford employed the ho-hum approach.
“The marketing of the Focus Electric is to people who buy electric vehicles, not to you and me,” said Jim Farley, Ford head of global marketing, to USA Today a year ago. “We’re focused on the people who buy them.”
The Wall Street Journal reported in August that Ford is expanding its hybrid offerings to compete with the Toyota Prius and others, but how is it these other automakers can develop these vehicles without putting taxpayer resources at risk, yet Ford can’t?
So 33,000 employees were not added to employment, but suddenly converted to “green” workers, all to build cars that relatively few will buy. According to Bloomberg News, Ford owes $5.5 billion on the loan, is making quarterly payments of $148 million, and its payback terms extend through June 2022. More good news: Ford didn’t take bailout money and didn’t go bankrupt – another “win” for the Obama administration!
Nissan. CEO Carlos Ghosn said in October 2011 that he would manufacture the all-electric Leaf wherever governments put up subsidies and incentives, and so he joyfully raked in a $1.44 billion ATVM loan to refurbish a plant in Tennessee to build the EV and its batteries. The project’s promoters said the alterations would lead to 1,300 new jobs, enabling Nissan to produce up to 150,000 Leafs and 200,000 battery packs per year, which will lead to the all-important avoidance of 204,000 tons of carbon dioxide emissions annually. Last year Ghosn predicted sales of 1.5 million EVs by 2016, and said EVs will account for 10 percent of new car sales by 2020.
It’s not happening, and now Nissan has admitted as much.
“We were a little bit arrogant as a manufacturer when we went to the 50-state rollout,” said Al Castignetti, Nissan’s vice president for sales, to Automotive News in late November. “We had assumed that there were people just waiting for the vehicle who would raise their hand and say, ‘Give me a Leaf, give me a Leaf, give me a Leaf.’”
The expectations were diminished to such a degree that Nissan canceled the grand opening for the new plant that was scheduled for late November, despite much earlier fanfare and anticipation. And beyond the poor sales, the Leaf has also suffered complaints about battery power loss in hot climates and extremely limited range, which of course leads to driver anxiety.
The follies surrounding each of the ATVM recipients is reflected in a report published in March by the Government Accountability Office, which reviewed DOE’s loan programs for a briefing to both the House and Senate’s Appropriations subcommittees on Energy. Investigator Frank Rusco found the ATVM program was getting the cold shoulder from other electric vehicle entrepreneurs and major automakers. Of the $25 billion that was made available, DOE only issued $8.4 billion in guarantees to the above-mentioned five companies – the remainder has been mostly left unused.
“…the negative publicity makes DOE more risk-averse, or makes companies wary of being associated with government support,” Rusco wrote.
And besides the ATVM loan program, there are troubled vehicle and battery companies that received DOE grants from the stimulus, including bankrupt A123 Systems and Ener1, and troubled Smith Electric Vehicles and LG Chem.
Evaluations of the Obama administration’s electric transportation sector “investment” extend beyond whether companies simply go bankrupt or not. They need to be measured also against whether they are reaching goals that were sold to the public, whether the money is actually being used for its intended purpose, and indeed whether they are achieving the environmental milestones they set.
Remember, all these initiatives were supposed to save us from global warming, right? Since there has been no warming in the last 17 years, I guess that could be called a success.
Mitt Romney’s comment about President Obama’s acumen as a public equity investor: “You pick the losers,” has put Obama’s failed green energy emphasis under the microscope, bringing into question: have any been a success? Well, some haven’t failed, yet.
In our last report, Obama Never Admits Green Energy Failure, we profiled 15 companies that each received funds from the American Recovery and Reinvestment Act—the stimulus—and have gone bankrupt. In Wednesday’s debate, Romney listed two of our “bankrupt” list: Solyndra, the best known, and Ener1, now known thanks to Romney; and two that haven’t failed, yet: Fisker and Tesla—both electric vehicle manufacturers.
Fisker and Tesla received their funding from the Advanced Technologies Vehicle Manufacturing Program (ATVM), but they are not the only two green energy stimulus-funded projects that are troubled. Here, in this report, we will profile twenty different companies/projects that received funding from various loan guarantee programs (LGP), grants, and tax incentives. These are projects that are still functioning, but are facing difficulties.
Because of the debate exposure, we’ll look first at Fisker and Tesla. Then we’ll move to those that were funded through the Department of Energy (DOE) LGPs 1703 and 1705. Some of these companies/projects were profiled in our summer green-energy crony-corruption reports that focused on projects that shared these traits: junk bond-rated projects, Department of Interior (DOI) fast-tracked approvals, and politically connected. In these cases, we’ll link back to the original report that offers much more detail than we’ll include here. The last group, listed in alphabetical order, includes companies/projects that received stimulus funds through other programs—though no less important.
As with the previous report, we’ll list the company/project name and the funds received. For those with political connections, for brevity's sake, we’ll add an * after the name. We’ll then include a description with some interesting details and links to additional information for those who want more or who want to check our research. Once again, I am collaborating with researcher Christine Lakatos.
Before we get to the profiles, here’s a quick overview of the primary funding mechanisms used for the Obama Administration’s pet green-energy public-equity investments.
Since 2009, DOE has guaranteed $34.7 billion – 46% through the 1705 ($16 billion of which 90% are politically connected), 30% through the 1703 ($10.3 billion—AREVA and Georgia Power), and 14% through the ATVM ($8.4 billion and 3 of the five loans are tied directly to Obama).
1703 and ATVM were established prior to Obama—though the funds profiled here were all handed out by the Obama Administration. The 1705 program was created by the stimulus package, of which we know that 23 of the 26 projects were “junk rated,” and of those same 26 projects, 90% are politically connected. In 2010, the Government Accountability Office, at the request of Congress, reviewed the execution of the LGP. Their findings note that “LGP scope has expanded both in the types of projects it can support and in the amount of loan guarantee authority available. DOE currently has loan guarantee authority estimated at about $77 billion and is seeking additional authority.”
Three of the companies profiled in our report on the bankrupt projects were funded through the 1705 program: Solyndra, Beacon Power, and Abound Solar. Here, we will cover eight 1705 projects that are on life support or are having problems—putting close to $10 billion of taxpayer money at risk—approximately 1/3 of the $34.7 billion doled out through DOE LGP just to help out Obama and his Democrat cronies (100% of these projects have meaningful political connections).
Fisker and Tesla received ATVM funding.
For the next four years, let’s build the economy and support responsible energy; the stuff we know works: oil, gas, coal, and uranium/nuclear. When the economy is strong again, then we can “invest” in some R & D for the future.
Let’s pick projects that will benefit all Americans, winners, not losers.
Fisker Automotive* -- $528.7
In September 2009, Fisker received the ATVM loan to build the $87,900 flashy plug-in Karma sports car. Reports at the time stated: “Fisker plans to use $169.3 million of its loan to work with U.S. suppliers to produce the more expensive Fisker Karma, which will be developed at its Michigan and California offices, but then will be assembled “overseas.” The other $359.36 million will go toward producing "Fisker’s Project Nina, which will be entirely manufactured in the United States.” Fisker expected to “Become profitable by 2011.” ABC reported: “Vice President Joseph Biden heralded the Energy Department's $529 million loan to the start-up electric car company called Fisker as a bright, new path to thousands of American manufacturing jobs.” Those jobs didn’t materialize—at least not in America. The Karma was produced in Finland. Two years after the loan was awarded, the Washington Post stated that Fisker “has missed early manufacturing goals and has gradually pushed back plans for U.S. production and the creation of thousands of jobs” and announced that the Karma “failed to meet a promised energy-efficiency standard.” Now, in 2012, Fisker Automotive is laying off staff in order to qualify for more government loans. So, President Obama’s “green” energy stimulus was supposed to create jobs; now it's destroying jobs so that companies can get more stimulus? Of course, news of defective battery packs and subsequent fires haven’t help sell the Karma. Fisker has faced “multiple 2012 sales prediction downgrades for its first car release, delivery and cash flow troubles.” Though the company has balked at Solyndra comparisons, Fisker may well be on “death’s door.”
Tesla Motors* -- $465 million
Like the Fisker Karma, the Tesla roadster is popular with the likes of Leonardo DiCaprio and Google co-founder Sergey Brin, and other “Silicon Valley luminaries on the waiting list for the company's super-cool and expensive electric sports cars”—as they are the only people who can afford the $100,000+ sports car. Despite the fact that Tesla has been successful in raising hundreds of millions in private equity, it still needed the ATVM loan to help it get out of “the proverbial garage.” It looks like the “luminaries” will need to keep waiting. Tesla has been plagued with design problems: “If the battery is ever totally discharged, the owner is left with what Tesla describes as a ‘brick’: a completely immobile vehicle that cannot be started or even pushed down the street. The only known remedy is for the owner to pay Tesla approximately $40,000 to replace the entire battery.” Other complaints about Tesla include “Over Promise, Under Deliver.” Last month Tesla issued more shares and announced that “Q3 revenues would not meet analyst estimates.” Despite its problems, Tesla, as Forbes green tech writer Todd Woody said, is not Solyndra—though one would be engaging hyperbole to call it a success.
1703 Loan Guarantee Program??AREVA acquired Ausra Inc.* –– $2 billion ?In March 2010, this Kleiner Perkins Caufield & Byers (KPCB) investment that “develops and deploys utility-scale solar technologies,” was acquired by AREVA Inc., the French state-owned nuclear giant. Two months later, in May of 2010, the DOE offered AREVA Enrichment Services, LLC a conditional commitment for a $2 billion loan guarantee to support the Eagle Rock Enrichment Facility in Idaho Falls, Idaho. As rumors of AREVA “suspending its Idaho uranium enrichment plant” circulated, AREVA CEO Luc Oursel did confirm: “the company has been hit by financial problems that will affect the Eagle Rock Enrichment Facility and others worldwide.” Further, according to John Stossel's Green Energy Myth July 2012 tally, “Shareholders of AREVA lost over 60% of their money last year . Why did we enrich the French? Who knows, but it's awfully fishy when we find our usual green cronyism suspects hovering around "government green" like vultures—Kleiner Perkins, where John Doerr and Al Gore are both partners and 2008 Obama supporters. Meanwhile billionaire John Doerr –– considered "a very big-ticket Obama donor" by New York Magazine –– influenced the 2009-stimulus, sits on the president's job council, and in February 2011 hosted a star-studded billionaire Silicon Valley dinner for the president. He just so happened to rake in billions of stimulus money for his KPCB clean-energy portfolio, including Fisker Automotive listed above. Other investors in Ausra close to Obama are Khosla Ventures and Gore's Generation Investment Management firm, but let's leave those cans of worms closed for now...??
1705 Loan Guarantee Program
BrightSource Energy* -- $1.6 billion
Using a proprietary power-tower solar thermal system, BrightSource Energy has a three-unit power system project known as “Ivanpah,” located near the California/Nevada border, south of Las Vegas. The BrightSource loan was considered a bailout, and is clearly a misuse of the DOE Loan Guarantee Program, and a direct violation of the American Recovery and Reinvestment Act of 2009. According to Peter Schweizer’s Throw Them All Out book, “BrightSource badly needed the infusion of taxpayer cash. It had been losing lots of money. It had a debt obligation of $1.8 billion and, in 2010, lost $71.6 million on revenue of just $13.5 million.” Despite the fast-tracked DOI approval, this project on federal land, has been plagued with problems. In April 2011, construction was halted because it put endangered desert tortoises at risk of being murdered. So far BrightSource has spent approximately $22 million to relocate and care for some 202 desert tortoises — a cost of $108,910 per tortoise,” and will be spending big taxpayer bucks in the future to help preserve the turtles. Still, in August of this year “BrightSource Energy (BSE) invited media on a tour of its now half-complete Ivanpah solar power plant,” proclaiming that the solar power plant is on track. However, what the folks at BrightSource aren’t bragging about is the fact that they “lost $111 million in 2011 and [that they] are heavily dependent on government subsidies and government mandates, and that's not a good place to be in this economic climate,” and this past spring, abandoned their attempt at an IPO.
First Solar manufacturers “thin film” solar modules and is now moving into project development. Considered by the House Oversight Committee as a “scheme,” since the finalization of its $3 billion in taxpayer-funded loans, the company has had a series of issues ranging from being the “biggest S&P loser in 2011,” to the CEO being fired, and tons in between. In April 2012, First Solar laid off 2000 workers and closed factories. In May, a massive round of furloughs was announced. In a May 16, 2012 hearing, CEO Michael Ahern admitted: “in sheer numbers, most of our full-time employees are outside the US.” According to Forbes this past July, “Shares of First Solar, Inc. (NASDAQ:FSLR), are selling at their lowest level in five years. The company, which is the leading solar company in the United States, lost $39.5 million last year. In the first quarter of this year, First Solar reported a loss of $449 million after non-recurring expenses of $405 million.” Meanwhile, Reuters reported on September 24, 2012, “First Solar, for example, postponed indefinitely its plans for a second U.S. factory in Arizona because of the weak market conditions.” And, in May, the Heritage Foundation predicted: “It’s just a matter of time before [First Solar] joins the bankruptcy ranks of Solyndra and Beacon Power.”
Nevada Geothermal* -- $78.8 million, plus $69 million in federal stimulus-funded grants
This geothermal company was heartily endorsed by Energy Secretary Steven Chu and Senate Majority Leader Harry Reid who said: “This project is exactly the type of initiative we need to ensure Nevada creates good-paying jobs.” Last October, an auditor for Nevada Geothermal Power said the company would probably not survive much longer. At the time, the company laid off 100 workers—which represents a large percentage of its workforce. Recently, the Washington Times revealed that power at Nevada Geothermal (NGP) is dimming and may be the next green-energy bankruptcy. Late last month, it was announced that NGP may transfer ownership to a lender after projecting the facility will produce less power than expected.
NextEra Energy Genesis Solar Project* -- $681.6 million
This solar energy project may be the victim of its favored treatment. According to the Los Angeles Times, “The $1-billion Genesis Solar Energy Project has been expedited by state and federal regulatory agencies that are eager to demonstrate that the nation can build solar plants quickly to ease dependence on fossil fuels and curb global warming. Instead, the project is providing a cautionary example of how the rush to harness solar power in the desert can go wrong—possibly costing taxpayers hundreds of millions of dollars and dealing an embarrassing blow to the Obama administration's solar initiative.” The House Committee on Government Oversight and Reform’s March 20, 2012 report says: “To expedite site approval, NextEra opted for a less thorough process.” As a result, the site “encroached on the habitat of the endangered kit foxes.” NextEra had to move the foxes prior to grading the site. “Ultimately, seven foxes died from NextEra’s removal process.” Additionally, there have been concerns of desert tortoises and a “prehistoric human settlement,” of which the latter has “sparked a potential standoff between Native American tribal groups on one side and the Bureau of Land Management and the solar developer on the other.”
SunPower Corp.* (project bought by NRG Energy*) –– $1.2 billion DOE loan guarantee
Despite SunPower's well-known financial issues, and the fact that it was under a shareholder suit alleging securities fraud and misrepresentations, just days (September 2011) before the 1705 Loan Guarantee Program’s deadline, along with four other solar companies, its $1.2 billion loan guarantee from the DOE was approved. This $1.2 billion of taxpayer dollars went to build a 250-megawatt solar plant (the California Valley Solar Ranch in San Luis Obispo County), “a project that will help create 15 permanent jobs, which adds up to the equivalent of $80 million in taxpayer money for each job.” While the conditional loan was announced in April 2011, “shortly thereafter, French energy giant Total bought a majority ownership in SunPower and extended a $1 billion credit line to the company.” Now, SunPower never directly got the cash because they sold the California Valley Solar Ranch that received the federal loan to NRG, an energy company based in New Jersey. But SunPower is still developing the project and stands to profit if it succeeds. The House Oversight March 20th report, noted this project as “non-investment” grade –– part of the DOE's disastrous loan guarantee program, as 23 of the 26 were junk rated, putting $16 billion of taxpayer money at risk. SunPower: Twice As Bad As Solyndra and twice full of cronyism and corruption –– both SunPower and NRG Energy have meaningful political connections to President Obama and other high-ranking Democrats. ?
Other Stimulus funded projects
A123 Systems* -- $390 million
On September 13, 2010, President Obama called lithium-ion electric-car battery maker A123 Systems CEO and said, “This is about the birth of an entire new industry in America—an industry that’s going to be central to the next generation of cars.” According to Radio Michigan, part of the NPR Network, during the call, which took place at the plant’s opening, Obama touted: this “shows it is possible to build an advanced battery industry in the U.S. basically from scratch.” A123’s primary customer was Fisker Automotive. It is the A123 batteries that caused the “bricking” addressed in the Fisker summary. In a little more than two years, A123 has laid off 125 employees, seen the stock fall to less than $1, faced lawsuits, and given the Chinese control of the company. ?
AltaRock* -- $6 million, $25 million, plus $1.45 million
AltaRock received $25 million for an Engineered Geothermal System (EGS) demonstration project in Oregon and an additional $1.45 million to develop more efficient EGS exploration drilling methods. AltaRock’s similar venture in California was shut down due to drilling problems after receiving $6 million from the DOE. The Oregon Newberry Project hopes for better results with the testing phase expected to be complete by 2014.
Bloom Energy* -- $5 million
Expected to work like magic by creating cheap, clean energy from a refrigerator-size box, known as the Bloom Box, Bloom Energy has fallen from its glory day, February 21, 2010, when it debuted with a segment on 60 Minutes. The Bloom Boxes were to be made in Delaware. A few months ago, a lawsuit was filed against Bloom “on the grounds that it represents a ‘crony’ deal that will unfairly charge utility ratepayers millions of dollars and bar competitors from the state.” However, a Breitbart report states: “‘cronyism’ may be the least of the company's problems: the ‘green’ energy its generators produce may, in fact, be less efficient, more expensive, and dirtier than that produced by conventional alternatives.”
CH2M Hill* -- $2 billion
Despite its history of problems, CH2M Hill, a consulting, engineering, and construction firm received stimulus funds for the clean up of nuclear waste from cold war-era sites. The Washington Post reported that CH2M Hill was slated for the stimulus funds before President Obama was even inaugurated. Senator Patty Hill (D-WA) lobbied for the program and CH2M gave her $16,000 in political contributions. The Blaze reports that CH2M also has connections with former green jobs czar Van Jones. Nonetheless, once the stimulus funds ran out, it was predicted, in January 2011, that 1600 people would lose their jobs. In July, it was announced that 1200 would be laid off. Accuracy in Media has done a thorough investigative report on the Ch2M case.
Chevy Volt* -- $151 million, $105 million, plus stimulus funds
A House Oversight and Government Reform Committee, in a January 2012 report, accuses President Obama of using an “unusual blurring of public and private sector boundaries” in the case of the Chevy Volt. The report cites: the Administration has offered substantial taxpayer-funded subsidies to encourage production of the Volt, such as $151.4 million in stimulus funds for a Michigan-based company that produces lithium-ion polymer battery cells for the Volt as well as $105 million directly to GM.” Yet, the Volt has not been a success. GM has halted the Volt’s production and laid-off 1300 workers. In August, Forbes predicted that “GM is headed for bankruptcy—again”—though not until after the election. Perhaps, as the Washington Examiner suggested, Biden’s bumper sticker slogan “BIN Laden is dead and General Motors is alive” would be more accurate as: “Al-Qaida's alive and GM is lurching,” And get this...the Chevy Volt has a new deep-pocketed customer: the Pentagon, which means taxpayers, again.
ECOtality* Inc. -- $126.2 million
The Daily Caller calls ECOtality: “yet another troubled green-tech company that has received taxpayer funds and public support from the White House.” Touted in President Obama’s 2010 State of the Union address, ECOtality was supposed to install 1400 electric car chargers in five states and “an estimated 750 jobs are likely to be created over the life and scope of the project.” Less than 7000 have been installed and according to Recovery.gov, 144 jobs have been created. According to a statement from its SEC filing, “We may not achieve or sustain profitability on a quarterly or annual basis in the future.” According to the Heritage Foundation, the company is also under investigation for insider trading.
Johnson Controls -- $299 million
The money was supposed to go to making electric batteries and for opening up two factories in the US. Touted as a “success” in an Obama campaign ad, Johnson Controls actually opened only one US factory—and it operates at half capacity. The second factory was built in Hungary. The US plant featured in the ad has been fined for “$188,600 for exposing employees to higher than permissible levels of lead.” The Heritage Foundation reports that Johnson Controls will be laying off workers.
Montana Alberta Tie Line* -- $161 million
A transmission line project that was the first authorized under the stimulus program, the Montana Alberta Tie Line was seen as a good conduit for stimulus money. The Washington Post reports: “The 214-mile line, known as the Montana Alberta Tie Line, which is supposed to run from Great Falls, Mont., to Lethbridge in Alberta and is designed to facilitate wind generation in northern Montana” is two years behind schedule and $70 million over budget. Inspector General Gregory H. Friedman said the project has come to “a standstill, with no progress being made.”
National Renewable Energy Lab* -- $200 million
The Daily Caller reports: “The Obama administration supported the NREL in 2009 with roughly $200 million in stimulus grants. Energy Secretary Stephen Chu visited Golden in May 2009 to promote the NREL as a beneficiary of those funds.” Yet, as the Denver Post reports: “The Golden lab, which saw tremendous investment as part of President Barack Obama's stimulus efforts, said it will use voluntary buyouts to cut 100 to 150 jobs.” The Denver Post cites the Governor's Energy Office, director TJ Deora as saying: “We love having the jobs here in Colorado, but this was anticipated, now that the stimulus money is winding down.”
Schneider Electric -- $86 million
The Iowa Republican reports: “Schneider, which bought Square D Company in 1991, has received over $86 million in federal stimulus money. Some of the money went to make energy upgrades to buildings and factories as part of the administration’s Better Buildings Better Plants Challenge. According to a White House press release, Schneider received the funds because it had pledged to reduce energy consumption in 9 million square feet of building space, covering 40 different plants, by 25 percent.” In May, in the midst of an Obama Iowa campaign stop, Schneider announced that it was cutting 80 jobs—roughly 20% of its Cedar Rapids workforce. Schneider is moving its production line of low voltage circuit breakers to Mexico. The Iowa Republican closes its report with this: “It is also frustrating to see large companies like Schneider receive millions in stimulus dollars and still relocate jobs to Mexico. Maybe instead of finding ways to keep giving incentives to the wind industry in Newton, the President should explain why companies that have received millions from his administration feel the need to create jobs in Mexico and not Cedar Rapids.”
Serious Material* -- $548,100
While you may have never heard of Serious Material, they have one of the most interesting stories. This California-based company has a window manufacturing plant in Chicago, about which President Obama said: “These workers will now have a new mission: producing some of the most energy-efficient windows in the world.” And Vice President Biden said: “This is a story of how a new economy predicated on innovation and efficiency is not only helping us today but inspiring a better tomorrow.” John Stossel reported that Serious Material’s CEO claimed that his factory opening wouldn’t have been possible without the Obama administration. Stossel says, “He may have known something we didn’t.” In January 2010, “Obama announced a new set of tax credits for so-called green companies. One window company was on the list: Serious Materials. This must be one very special company.” How special? Cathy Zoi, who oversees $16.8 in stimulus funds, is married to Robin Roy—vice president of policy at Serious Windows. Breitbart.com calls them “a metaphor for Obama’s political career, featuring strong-arm union tactics, corrupt Chicago politicians, crony capitalism, and media propaganda.” May the metaphor continue. Earlier this year, Serious admitted defeat. They closed the Chicago plant. About 46 workers lost their jobs.
Solar World Industries America -- $4.6 million
A subsidiary of Germany’s Solar World, the US company received funds through the DOE’s Office of Energy Efficiency and Renewable Energy—about which Energy Secretary Steven Chu announced “more than $145 million for projects to help shape the next generation of solar-energy technologies and ensure that the United States remains a leader in the global market.” Apparently that wasn’t enough for Solar World. After Solar World complained that Chinese solar-panel manufacturers benefitted from unfair subsidies by Beijing, the US Commerce Department announced tariffs on Chinese-made solar panels. Shortly thereafter, Fox News reported: “Solar World and others had seen their market share plummet as sales in inexpensive Chinese panels have skyrocketed.” Solar World's stock price has dropped 75% and Chief Executive Frank Asbeck has given up his pay “until the company is profitable again.”
But in most cases, the money is actually going to well-connected companies that would have been able to get capital without the government’s help. The fact that these companies don’t go under shouldn’t be seen as evidence that the government was right to offer or guarantee the loans in the first place; rather, it’s another example of the rampant corporate welfare going on in Washington. Of course, any recipient company loves the handout because it gives them a significant advantage over the competition: It helps attract private investors who now see the projects as safe, and allows the company to borrow more money at lower interest rates.
Now, another DOE loan program is under scrutiny. The Advanced Technology Vehicles Manufacturing (ATVM) program guaranteed some $8.4 billion since 2009 to companies such as Ford, Nissan, and Fisker. Yesterday, the House Committee on Oversight and Government Reform, led by Representative Jim Jordan, held a hearing about the Solyndra of the electric-car industry: Fisker Automotive.
In 2009, Fisker received a $529 million federal loan from the Department of Energy’s ATVM program. According to the New York Times, two years after receiving the loans, the company repeatedly missed production targets and other deadlines. They’ve now fired 75 percent of their workforce and hired bankruptcy advisers. It has not built a car since July 2012. That lead the DOE to suspend their support, after having guaranteed $192 million of the $529 million loan. Like Solyndra, taxpayers will foot that bill, minus the $21 million that the government managed to seize from the company’s cash reserves.
What did Fisker do with our money? It didn’t create the permanent jobs promised by Vice President Biden and founder Henrik Fisker. It did produce — at least until last year — the Karma sedan, hawking it for the hefty price of $104,000. But the car wasn’t just expensive, it actually wasn’t working. A test drive for the Consumer Reports ended with the Karma breaking down and having “to be hauled away on a flatbed truck.”
To add insult to injury, the company used batteries from A123 Systems, another company that went under after receiving government help — $249 million in 2009 stimulus money, a $9 million grant from the state of Michigan, and another $100 million in tax credits and $41 million in tax breaks and subsidies. In fact, it looks like the Fisker loan was meant “to ensure there was a market for A123’s batteries.” A123 was ultimately purchased by Chinese investors, but there is no sign that anyone is interested in buying Fisker.
So Fisker is pretty much the Solyndra of the electric-car industry. It’s bad news for taxpayers, but the worst part of this story, once again, is that most of the money guaranteed by the Department of Energy will go to companies that could have borrowed money on their own, that the government continues to play venture capitalist with our money, introducing systematic distortions and unintended consequences to the market. Loan guarantees are privileges granted to special interests – in other words, cronyism — whether the companies that benefit from the loans go under or stay afloat.
As my colleague Matt Mitchell documented in an excellent paper, “The Pathology of Privileges,” “whatever its guise, government-granted privilege is an extraordinarily destructive force. It misdirects resources, impedes genuine economic progress, breeds corruption, and undermines the legitimacy of both the government and the private sector.”
China gets the cash meant for American jobs
It’s been more than five years since President Obama signed his misguided economic-stimulus package into law, creating green-energy subsidies and expanding others, but American taxpayers are still feeling its disastrous effects.
This month a deal was reached between competing creditors of much-ballyhooed Fisker Automotive Inc., which went bankrupt after receiving a $529 million loan through the Department of Energy’s (DOE) controversial Advanced Technology Vehicle Manufacturing program. The failure of Fisker highlights ongoing concerns over the Obama administration’s handling of taxpayer-backed investments in so-called “green energy” initiatives.
Once again, overseas companies have emerged as the big winner, with two of China’s largest auto manufacturers set to receive millions in windfall benefits from the sale of Fisker’s operations and the Energy Department loan.
The loan program is overseen by DOE’s Loan Programs Office, which is perhaps best known for its “success” in backing the solar-energy startup Solyndra, which cost American taxpayers more than $500 million. The Loan Programs Office has also provided billions in direct loans to U.S. auto manufacturers to encourage green-energy innovation and, ironically, to help offset compliance costs associated with far-reaching federal standards.
Under the program, Fisker was approved to receive up to $529 million in taxpayer-backed loans. As is the case with many of the Obama administration’s market-distorting green-energy gambles, Fisker proved to be a failed bet and eventually filed for Chapter 11 bankruptcy.
The most recent development in the administration’s green-energy gamble on Fisker has two Chinese auto manufacturers increasing their business capital with American taxpayers footing the bill. First is a subsidiary of China’s Wanxiang Group, a multinational Chinese automotive-components manufacturing company owned by Chinese billionaire Lu Guanqiu. Second is Hybrid Tech Holdings, owned by Chinese billionaire Richard Li.
The two billionaires went head-to-head in a bidding war last year over Fisker’s operations, with Lu Guanqiu winning out with a bid of $149.2 million in a bankruptcy sale. His bid for Fisker is only complemented by his previous purchase of A123 Systems LLC. (A123 Systems was another recipient under the Energy Department’s loan program and much like Fisker, was a failed green-energy gamble that ended up filing for bankruptcy.) Under similar circumstances, he purchased A123 Systems at the expense of the American taxpayers.
Richard Li did not come out empty-handed, considering he purchased the taxpayer-backed loan to Fisker for $25 million at auction. According to a recent article in The Wall Street Journal, Mr. Li paid a “deeply discounted price for the DOE loan, which had a face value of $168 million at the time it was put up for auction.” The article went on to point out that Mr. Li would profit as much as $90 million from his purchase of the loan.
The Obama administration green-energy gamble to prop up Fisker allowed two of China’s largest auto-manufacturing companies to directly receive hundreds of millions in windfall benefits at the expense of U.S. taxpayers. So much for “nation-building here at home.”
Sadly, the Fisker debacle is not even the most recent failure of the Energy Department’s loan program. Just this month, Missouri-based Smith Electric Vehicles announced that it was closing its operations in the United States owing to financial troubles.
Under the department’s loan program, Smith Electric received almost $30 million in funds. In justifying the funds, the White House projected more than 220 jobs would be created as result. However, “Smith only reported the creation of the hourly equivalent of 70.4 jobs — meaning the DOE spent an average of about $414,000 per job created.” The Smith Electric closure further exemplifies the continuing failure of the president’s green-energy gambles.
In a report released this month, the Government Accountability Office advised against continuing the Department of Energy’s Advanced Technology Vehicle Manufacturing loan program. The report suggested that Congress rescind “all or part of the remaining credit subsidy appropriations to the loan program, unless the [DOE] can demonstrate sufficient demand for new ATVM loans and viable applications.”
Even so, the Obama administration looks set to double down on their bad green-energy bets with a public push recently for the controversial program. The Energy Department’s website cites a remaining $16 billion in loans still available to applicants. It’s time for the Obama administration to pump the brakes on the loan program, and wind down this taxpayer-funded jackpot that allows Chinese interests to capitalize on the U.S. mistakes.
Justin Sykes is a policy analyst at Americans for Prosperity.