Fisker Karma Going Away, Along With Our Money

For John, BLUF:  The jury is still out on Department of Energy ability to wisely invest.  Nothing to see here; just move along.

From The New Yorker, we have an article by James Surowiecki on the slow demise of the Fisker Automotive.  The title is "What Killed the New Electric Car".  No, it is not a question, it is a statement.  Actually, it is a defense of the current Department of Energy and its various investments in solar power.  You see, Fisker is going out of business—it hasn't rolled a new Fisker Karma off the production line in months.  And, per the article, while the Karma looks good from the outside, inside it is not an engineering marvel.  Quality counts.  So do low prices. Here are the first two paragraphs:

Fisker Automotive, maker of the Karma, a hundred-thousand-dollar electric-gas hybrid sports car, is in deep trouble.  It’s laid off seventy-five per cent of its workforce, hasn’t produced a single car in nine months, and may well declare bankruptcy in the next couple of weeks.  And opponents of the U.S. government’s attempts to invest in green energy couldn’t be happier, since Fisker received nearly two hundred million dollars in loans from the Department of Energy under a program designed to foster investment in electric and hybrid vehicles.  Fisker’s failure (like that of the solar company Solyndra before it) is, as a result, being held up as evidence of the futility of all government investments in green technology.  Lou Dobbs said, simply, “All they pick are losers.”  And House Republican Jim Jordan, who will be chairing a hearing next week on the government’s loan to Fisker, called the company’s troubles “a very timely case study of what happens when the Department of Energy plays venture capitalist with taxpayer money.”

The blanket condemnation of green subsidies is, of course, purely ideological—Fisker also raised $1.2 billion in private money, but [Congressman Jim] Jordan’s not arguing that this is proof that private investors should stay out of the business of investing.  And contrary to [Reporter Lou] Dobbs’s assertions, many of the government’s investments are still doing well (including, most notably, Tesla, which just turned its first profit).  And anyway, this is the nature of venture capital: you make many bets, knowing in advance that some are going to fail.  The key to making government investments work is that when those investments go bad, the government, like any good private investor, has to be willing to cut companies off instead of keeping them on life support.  That’s precisely what the Department of Energy has done.  Fisker was originally awarded five hundred and twenty-nine million dollars in loan commitments, but when it failed to meet production deadlines on the Karma, the D.O.E. cut off the company’s access to three hundred and thirty-six million dollars of those loans.  Far from coddling Fisker, the government has been a stern taskmaster—indeed, reports suggest that it’s the D.O.E. that’s been pushing hardest for Fisker to file for bankruptcy.

So, the real question is, is there value to the Department of Energy investing in new technologies, which might reduce energy consumption?  I am not sure this article answered that question.  I am of mixed feelings on this.  On the one hand, feed money to bring new technologies on line is a good thing.  On the other hand, the US Government, nay, all governments over time and space, tend to be a heavy hand and often on the wrong thing.

Back on 20 October 2011 [18 months ago], the Instapundit had this to say:

THE FISKER KARMA:  Solyndra On Wheels?  “Our tax dollars at work… a half-billion dollar loan (actually $529 million) from the U.S. Department of Energy to develop a hybrid toy for the wealthy and/or celebri-licious (like Leonardo DiCaprio, one of the first customers) that, in real world driving, won’t get much better mileage than your average crossover utility vehicle.  Not only that, but the cars are manufactured in Finland — that’s right, Finland – and shipped here for sale, where their purchasers will then receive a $7,500 tax credit for buying one . . . . Oh, and by the way, it just so happens that several major investors in the company are also major donors to the Democratic Party.  Can you say, 'crony capitalism?'”

At least it’s really good looking.

The Fisker investment is not a shining example of success and Mr Surowiecki does not balance it in his article.  The jury is still out.

Regards  —  Cliff