By on April 28, 2012

It’s impossible for a government to do anything with a market, for example, regulate, tax or subsidize, without distorting that market. Whether or not those distortions are necessary is a matter of public policy debate, but they’re a fact of life. Another fact of life is that if you make your business plan dependent on governmental policies, subject to the ebb and flow of politics in democracies, you may find your enterprise becoming a controversial topic of political debate. That can hardly be good for business. That may explain why Coda has withdrawn their request for $334 million in Department of Energy loans. It also pretty much describes Fisker’s current situation as a political football.

Republicans have been using Fisker’s suspension of work on their second vehicle, the more moderately priced Atlantic, and layoffs of their complete staff at the Wilmington, Delaware plant where the Atlantic was to have been built, as an excuse to lump Fisker in with the failure of solar panel maker Solyndra and financial difficulties at other companies funded through the DoE loan program. Senators Chuck Grassley and John Thune have asked Pres. Obama’s Energy Secretary Steven Chu about the advisability of the loan to Fisker to begin with.

Delays in production and related failures by Fisker to meet DoE benchmarks caused the agency, in May 2011, to put a hold on further drawdowns by Fisker from the $529 million in loans originally negotiated with the startup hybrid car maker. So far about a third of the total loan package has been disbursed to Fisker, used to develop the luxury Karma. While it’s been negotiating with the DoE to free up the additional funds to restart work on the Atlantic, Fisker has been actively trying to find alternative funding in the private sector. So far Fisker has received about $1 billion in private equity investment.

The report about Senators Grassley and Thune in Autoguide followed quickly upon news that one of those private investors, board member and former Fisker chairman Ray Lane, has started blaming the continued holdup of the DoE loans on presumptive Republican presidential candidate Mitt Romney’s campaign. Last week, Romney spokesman Ryan Williams explicitly tied Fisker to the Solyndra bankruptcy and called the automaker a failed investment.

“President Obama’s failed investments in companies like Solyndra, Fisker and Ener1 are a constant reminder to the American people that this president does not understand how the economy works, does not understand the appropriate role for government and does not have any ideas to get America working again.”

Lane is a managing director of Kleiner Perkins Caufield & Byers, a venture investment firm. In his email to Wilmington’s News Journal, Lane claimed that the only thing holding up Fisker’s continued access to the DoE funds was the Romney campaign’s comments.

“The DOE would have negotiated a new draw timeframe by now if it weren’t for Romney targeting these loans. Irony is Romney doesn’t understand he’s the problem and he’s lumping a company that did $100m in q1 with a company that’s bankrupt. “

Lane’s second point, that Fisker is a viable company, not a failed venture like Solyndra, was reinforced by bullet points in company founder Henrick Fisker’s own email. While acknowledging the truth that his company in fact did not meet DoE timelines, Fisker laid out the company’s case for further government funding.

We have had a faster monthly sales growth than any other start up car company.

Karma is only fully certified production car ever to emerge from the DOE program so far.

Karma delivered as final DoE milestone in Dec 2011 only 18 month after starting loan draws; another record.

(S)ome of the smartest investors in the world decided to invest in a US new start up car company and not in China or somewhere else. They have continued to invest, which should prove Fisker is a great and viable long term business model. Who better to make that prediction than the people who actually continue(even today) to put millions of dollars into Fisker Automotive.

Henrik Fisker also whined a bit about journalists not repeating the company’s talking points and, like Lane, took a swing at politicians.

Barely any journalist or politician in the US seems to be proud of the above facts.

I can understand Fisker and Lane’s frustrations but it seems to me that those that live by government funding might die by it too. Once Fisker decided to ask for government funding, it opened the door to entangling their company in the political process. More to the point of Lane’s remarks, Romney’s campaign and the Republican senators have only recently mentioned Fisker, following the latest round of layoffs at Wilmington. The DoE put the loans on hold almost a year ago, long before Republicans made it an issue (before the failure of Solyndra and similar firms, too). The energy department had ample reasons to suspend drawdowns without political pressure from the Romney campaign.

Lane is hardly a babe in the political woods. One of his partners at Kleiner Perkins is Al Gore. A search of campaign contributions databases shows that Lane has made substantial contributions to a variety of politicians. While most of those contributions went to Democrats, Nevada Sen. Harry Reid’s name shows up frequently, in the 2008 cycle Lane contributed to Republican John McCain, not Barack Obama. Kleiner Perkins, like all investment firms, is based on managing risk, and Lane obviously manages his political contributions similarly.

Fisker’s enterprise in Wilmington has received some state assistance as well, so it’s a big story in Delaware, Vice President Joe Biden’s home state. It’s an election year and jobs and the economy are likely to be front and center. Ray Lane is not naive. He’s got to know that Pres. Obama’s Dept. of Energy would not likely be dancing to the Republicans’ tune. Perhaps his statement was a message to Dr. Chu, Mr. Biden and Mr. Obama. Freeing up the additional loans would likely lead to an announcement about jobs in Wilmington. The News Journal described Lane’s comments as “suggest[ing] that he believes Fisker’s loan has also become a political football”. Fisker’s been a political football since it first applied for government funding. Mr. Lane is simply running his own plays.

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10 Comments on “Kicking Around The Fisker Football...”

  • avatar

    Lane actually has the nerve to complain about journalists while they let him dissemble and propagate lies. If he really is getting all the private capital that he says, then there is something wildly irresponsible about current money management. How can an enterprise get their hands on over a billion dollars of private capital while publicly stating that all their plans will remain on hold until a few hundred million dollars of graft come their way? Why do journalists let him get away with creating a causal relationship between a statement and an event that occurred a year earlier? Why let him get away with saying that “Karma delivered as(sic) final DoE milestone in Dec 2011 only 18 month after starting loan draws; another record,” when the reality is that they “in fact did not meet DoE timelines?” I wouldn’t give them a SASE.

  • avatar

    My interest in a company as an investor dissappears the second the government becomes one. I doubt people with real money are necessarily different. The powerful, connected people are fickle idiots when it comes to real business. It’s a shame that what appears to have been a good start up got caught up in the government supply of OPM.

  • avatar

    I thought the committment for the Solyndra loans were made during the Bush admin, and the money was released during Obama’s admin on auto-pilot.

    • 0 avatar

      Not exactly. There seems to have been at least some skepticism of Solyndra under both administrations but no commitments were made under Bush. The enabling legislation was passed and signed during the Bush administration in 2005. Solyndra was one of 16 finalists out of over 100 original applicants for loans. In Jan. 2009, just before Bush II left office the Bush DoE said that the Solyndra application had merit but needed more study before approval. The rejection was “without prejudice” so it’s not like the Bush administration was unalterably opposed, but no commitment for the loans was made until after Mr. Obama took office.

      From Wikipedia:

      “After President Obama took office, analysts in the Energy Department and in the Office of Management and Budget questioned the loan, as one Energy official wrote in an e-mail of “a major outstanding issue”: cash flow predictions showed that the Fab 2 subsidiary (the entity receiving the loan guarantee) would be low on cash in September 2011, possibly needing help from the parent company until the cash flow recovered in subsequent months.[12]

      In March 2009, after a successful milestone in the approval process, the White House wanted to announce the loan guarantee. One White House budget analyst nixed the announcement in a March 10, 2009 e-mail, writing “This deal is NOT ready for prime time” and listing remaining milestones.[13][14]

      On March 20, 2009, the Department of Energy committee that had remanded the loan application in January made a “conditional commitment” to Solyndra’s proposed $535 million loan guarantee, with final approval scheduled for September.[15][16] The White House and Solyndra had estimated that the loan would help to create 4,000 new jobs.[1]

      In August 2009, an Energy Department stimulus adviser, Steve Spinner, pushed for a quicker final decision on the loan, though he had recused himself from the approval decision itself because his wife’s law firm had done work for the company. [17] According to the Washington Post, the Obama administration tried to rush federal reviewers to approve the loan so Vice President Joe Biden could announce it at a September 2009 groundbreaking for the company’s factory.[18]

      The White House scheduled a press event for September 4 and federal reviewers gave final approval on September 2.[19] After securing the loan guarantee, the Federal Financing Bank, a part of the Department of the Treasury, loaned Solyndra the money on September 4, 2009.[20] Solyndra used the loaned funds to build a new manufacturing facility, Fab 2, in Fremont, California. Construction began in September 2009 and was completed in June 2010.[21] In May 2010, the company was promoted by President Obama in his visit as a model for government investment in green technology.[22] It was also visited by Energy Secretary Steven Chu.[23]”

    • 0 avatar

      It’s less important who did it than who says never again vs who still thinks it should be tried again. It was not an exception, it was a necessary eventual outcome of such programs.

  • avatar

    As a Delaware resident and contributor to the 12 million dollars Delaware spent on Fisker’s electric bill at the idled plant I view this all with a great deal of suspicion. I think the Elsmere site was meant to get money from the US of A into their bank account and nothing more. Fisker has done some remodeling of the plant but dragged their feet on the work despite having enough working capitol to proceed. Turning off the spigot of cash to them was one of the first right things they did.

    I read that article in the ultra left News Journal and it’s no surprise they gave Lane a forum to blame Romney even though the time lines are all wrong. This project was Biden’s baby and after they bulldozed the Chrysler plant in Newark this one needed to be saved.

    Fisker’s first electric car should not have been a 100k vehicle, they should have aimed at the middle of the market, or even the low end. But who knows what they were thinking, after all 529 million dollars is a lot of money to play with.

  • avatar

    Why people are subsidizing an electric car for the rich is beyond me, but then again, I’m just a peasant.

    • 0 avatar

      Not just an electric car for rich people, an electric Luxury car.. with Real Wood trim and Real Leather upholstry… only the Wood is ‘Salvaged Lumber’ and the leather is from the discarded bits of the cow-hide. Nothing like showing how much more globally responsible you are than the beer-swilling pontiac-loving redneck pleabs than through recyclable conspicuous consumption.

      Fisker MUST be having a laff here, I don’t know if he’s trolling the kind of people who’d actually Buy a Karma or if he’s trolling the kind of people who’d make fun of the people who’d buy a Karma, but he’s definitely trolling Somebody.

  • avatar

    “…nobody question weather they are American companies.”

    Expressing a doubt or choice between alternatives: “he seemed undecided whether to go or stay”.

    the state of the atmosphere with respect to wind, temperature, cloudiness, moisture, pressure, etc.

  • avatar
    DC Bruce

    This illustrates precisely what is wrong with this “crony capitalism.” Kleiner, Perkins is a venture capital firm, the “original” VC firm of Silicon Valley. All VC firms have one goal: to find companies that will show an explosive growth in value when they go public, or are acquired. We’re talking 10, 20, 100 times the amount invested.

    So, the deal with Fisker is for Kleiner, Perkins to piggy back on the government’s funding of Fisker. The government provides the bulk of the money in a loan that, at best, pays market interest. Meanwhile, KP provides a relatively small amount of equity capital. If the Fisker venture succeeds, KP and other connected individuals will make a killing . . . and the government, which provided the bulk of the money, will make 7 percent.

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