Fisker Motors Facing Fresh Scrutiny Over Government Loan Guarantees
Start-up company that received taxpayer support building cars in Finland
Fisker, which is building extended range electric vehicles, which allow the cars to be driven on a battery charge for more than 30 miles before a gas engine kicks in to power the car's batteries, has begin building its first car, the Karma, with a firm in Finland.
To be fair, the DOE loan guarantees were never directly tied to the production of the $97,000 Karma, but rather a $57,000 model called the Nina, which, by agreement with the DOE, has to be manufactured at a U.S. plant. That car is not expected to arrive until the end of 2012 at the earliest.
The fact that Fisker is building its first cars in Finland is not new, but the scrutiny is since solar panel maker Solyndra went bankrupt not long after receiving $535 million in loan guarantees from the DOE as part of a massive policy of support for "green" start-ups.
Republicans, trying to unseat President Obama in next year's election, are seizing on the Solyndra deal, as well as deals to support Fisker and Tesla Motors, another electric vehicle start-up. The strategy is to show the Obama Administration's "green" initiatives have been designed to favor campaign donors and that subsidizing start-ups is not a proper function of government.
Tulsa billionaire George Kaiser, a key Obama backer who raised between $50,000 and $100,000 for the president's election campaign, was one of Solyndra's primary investors. Former vice president Al Gore's investment group is a Tesla investor.
In the case of Fisker, founder Henrik Fisker told ABC News this week that the money guaranteed by the DOE has been spent on engineering and design work for the Karma and Nina that stayed in the U.S., not on the 500 manufacturing jobs that went to a rural Finnish firm, Valmet Automotive.
"The problem Fisker has right now is that money is fungible and it's campaign season in the U.S.," said AOL Autos Editor-in-Chief David Kiley. "There is nothing new here except the scrutiny turned on Fisker after the Solyndra bankruptcy."
Rep. Daryl Issa (R-CA), chairman of the House Oversight and Government Reform Committee, has had his committee investigating the Obama Administration's support of start-ups like Solyndra and Fisker. "There's been this attitude that somehow the government can weigh-in with loan guarantees and money and pick specific company winners and losers," Issa said recently on C-SPAN's "Washington Journal" program. "We see that as a backdoor, easy way to end up with corruption in government." Issa has been criticized for that position since he previously tried to secure DOE support for a California start-up, Aptera Motors.
Plenty of skeptics
Fisker, as well as Tesla, though, faces plenty of skeptics about the viability of the cars they are building to be sold on a scale large enough to justify the DOE's risk. Not only are the cars expensive, but both companies are unproven in their ability to successfully manufacture finished automobiles that are reliable and distributed properly.
The extended range electric car's drivetrain is based on GM's Chevy Volt technology that allows a Volt driver to go up to 40 miles on a charge before a gas-fueled motor kicks in to propel the car by keeping the battery charged. This past week, Fisker reported that the Karma's 32 miles of electric-only range would score only a 52 mpg rating from the government, and only 20 mpg when it burns gas.
The Volt is also a target of small government advocates who oppose the $7,500 tax credit that the Volt gets after a consumer plunks down in excess of $40,000 for one of the vehicles.
Henrik Fisker says the DOE loan guarantees have allowed the company to secure some $600 million in financing.
Tesla might be considered ahead of Fisker in the credibility department. More than 2,000 of its first electric car, the Tesla Roadster, are on the road today, while Fisker is just starting to get its first car into showrooms. Tesla, which has investments from Toyota and Mercedes-Benz, is further along in advancing a second, lower-cost car, the Model S.
Between Fisker and Tesla, the two companies have secured nearly $1 billion to start production of their cars, and they have drawn down more than $300 million.
Bottom Line: The money received by Tesla and Fisker are government loan guarantees, which mean taxpayers will be in the hook for the money if either company goes bankrupt. With unproven companies, that is not out of the realm of possibilities if the cars, if they are produced, are not scooped up by buyers. But the fact that Fisker is now manufacturing its first car in Finland, not in the U.S. has been public record for two years.
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