GigaOM’s Katie Fehrenbacher has come to the defense of Advanced Technology Vehicles Manufacturing Loan Program, concluding that the program “wasn’t an example of massive misspending from the DOE.” While the massive is all relative I suppose, the misspending here really isn’t.
The whole thing is in the news because Fisker Automotive, a loan recipient, recently crashed and burned, Solyndra-style. The company apparently spent over a billion dollars to produce about 2,000 cars. Fisker is now, like Solyndra, facing bankruptcy. And like Solyndra, it had primary private financiers who were also Obama campaign donors.
As the Center for Public Integrity reported back in 2011:
One of Fisker’s biggest financial supporters, records show, is the California venture capital firm Kleiner Perkins Caufield & Byers. Kleiner Perkins partner John Doerr, a California billionaire who made a fortune investing in Google, hosted Obama at a February dinner for high tech executives at his secluded estate south of San Francisco. Doerr and Kleiner Perkins executives have contributed more than $1 million to federal political causes and campaigns over the last two decades, primarily supporting Democrats. Doerr serves on Obama’s Council on Jobs and Competitiveness. Doerr has not replied to interview requests since March.
Fisker Automotive was awarded $456 million as part of the Advanced Technology Vehicles Manufacturing Loan Program. ATVM is part of the larger Department of Energy “green energy” loan program that spawned Solyndra.
This program amounts to welfare for electric cars. It’s operated like other “green” lending programs where the government offers very-low-interest loans to two kinds of companies: those that are viable enough not to need them, but want the excellent rates, and those that are so likely to fail that investors avoid them, and put taxpayer money at risk.
GigaOM has an excellent analysis of some of the problems that led to Fisker Automotive’s demise. It revealed things like the strange fact that ATVM officials awarded Fisker $456 million on September 22, 2009, a full two years before Fisker got its first car, the Karma, through Environmental Protection Agency hoops and ready to sell.
And the writeup revealed the strange Hollywood/middle-America disconnect that helped lead to the doomed investment:
Al Gore’s Inconvenient Truth debuted, and some in the Hollywood elite were starting to embrace hybrid cars and eco causes. Henrik Fisker has told reporters that he was inspired to build Fisker Automotive after seeing [Leonardo] DiCaprio drive a Prius to the Oscars and thinking he should have something more high-end. DiCaprio later became an investor and marketing partner to the company.
Figuring out how Leonardo DiCaprio driving a Prius to the Oscars will translate to a real market for $100,000 plastic cars was apparently not super important to anyone at the DOE.
“It would have only taken a couple a phone calls to industry veterans to have prevented all of this,” says electric car advocate Chelsea Sexton, adding “there’s no excuse for not doing homework. It appears none was done.”
Not only did the Karma cost $100,000, but it broke down after being driven fewer than 200 miles.
In the spring of 2012, Consumer Reports bought a Karma, and when it broke down after less than 200 miles, the magazine understandably gave it one of the worst reviews in automotive history. One of the problems with the Consumer Reports’ test car involved the battery. But the battery issue turned out to be much more widespread that just the review car, and Fisker’s battery supplier decided to replace faulty battery cells to the tune of $55 million.
So spending $200 million (what was actually received by Fisker Automotive of the $456 million awarded) on 2,000 poorly made cars without a market wasn’t enough to call the ATVM “an example of massive misspending from the DOE?” What about the fact that while the program touted 38,700 jobs “created or saved,” these jobs cost taxpayers $217,028 each?
And again, if the ATVM isn’t “an example of massive misspending from the DOE,” why is there $16.6 billion left unclaimed in the program, with the Government Accountability Office saying that no one will apply for it because “Most applicants and manufacturers we spoke with told us that, currently, the costs of participating outweigh the benefits.”
While it’s always going to be true that the program could have wasted a lot more money, it’s pretty clear that the money that was doled out was pretty poorly spent.