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 That may explain why Coda has withdrawn their request for $334 million in Department of Energy loans.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.