Fisker Spent $660,000 on Each $103,000 Plug-in Car … Fisker Automotive Inc. spent more than six times as much U.S. taxpayer and investor money to produce each luxury plug-in car it sold than the company received from customers, according to a research report. The Anaheim, California-based company made about 2,500 of its $103,000 Karmas before halting production last year, disrupting its plans to use a $529 million U.S. loan to restart a shuttered Delaware factory owned by the predecessor of General Motors Co. (GM) The Karma was assembled in Finland. – Bloomberg
Dominant Social Theme: Government will provide the seed money for a great, new Green industry.
Free-Market Analysis: We've written about many of the farcical elements of Green industry in the past and identified Fisker as one of the most egregious offenders. Unfortunately, the resurgence of electrical motoring caught the attention of buyers and investors with predictable results.
We saw this in the 1970s. In fact, it is not just car companies. Solar companies, wind-powered ventures and other sorts of companies offering consumers alternatives all proved to be vulnerable to economic downturns.
What is very clear to us is that high-profile electric-car ventures are foundering just the way they did in the 1970s. GM and Toyota as well as independents like Fisker are all seeing consumer resistance to their products.
The reality is not filtering through the media, which has a vested interest for a lot of reasons in avoiding reporting about this sort of consumer rejection but it obviously exists.
Even more disturbingly – for those who care about the public purse – just as in the 1970s, the electric car industry has once more been funded out of taxpayer tithes. People don't have any choice in the matter, but government bureaucrats in DC and Brussels especially have made decisions to promote this sort of technology.
The results are not pretty. Here's more from the article:
Fisker was allowed to keep using money from its Energy Department loan after violating its terms multiple times, according to a report released April 17 by PrivCo, a New York- based researcher specializing in closely held companies. It said it based its report on documents, including the loan agreement, obtained through the U.S. Freedom of Information Act.
"They made a mistake" in awarding the loan, PrivCo Chief Executive Officer Sam Hamadeh said of the Energy Department in an interview yesterday. "Should they have fought this sooner? Obviously — as soon as it became evident that they had begun to default."
PrivCo's report contains errors, particularly in asserting the Energy Department knew by December 2010 that the carmaker wasn't meeting milestones required to keep drawing taxpayer funds, Bill Gibbons, a department spokesman, said in an e-mail yesterday. The department cut off Fisker's funding in June 2011, after the company drew down about $193 million.
"PrivCo's assertion that Fisker defaulted in December 2010 is simply false," Gibbons said. "The milestones that PrivCo includes in its report are also wrong. The fact is, the department stopped disbursements on the loan after the company stopped meeting its milestones."
Fisker has spent $1.3 billion in taxpayer and venture capital money, or $660,000 for each car it sold, the report said.
Fisker stopped manufacturing cars late last year and fired three quarters of its remaining workers April 5. The company's first repayment of $20.2 million on the Energy Department loan is due April 22, the report said.
Let's assess the damage. We can see that with little or no fanfare (compared to previous, more positive announcements) Fisker has now fired most of its workforce and likely doesn't have the cash to repay the government.
The Fisker debacle is not the only one (and surely there will be more). The US Energy Department has already experienced one failure with solar-panel maker Solyndra LLC. Now the Fisker loan is going bad.
So here is our question: How many more of these disasters will pound the public purse? We've warned all along that Green industry is not especially viable. Government "public-private" ventures usually don't work. That's another meme propagating in the "good times" and regretted at length during the bad ones.
How many more Fiskers and Solyndras are out there, and how many more shareholders are going to be damaged? The Green euphoria ended badly in the 1970s, and we would tend to believe this sad script could repeat itself.