Congressional testimony taken Wednesday showed the car company produced vehicles that locked owners inside and wouldn't let them exit, one of a host of problems the automaker faced. The House Committee on Oversight and Government Reform took testimony from several high-ranking Fisker executives, including founder Henrik Fisker. The committee is looking at whether Fisker properly used $192 million in Department of Energy loans.
The committee is hoping to use Fisker as an example of what Republicans view as government waste. Republicans have targeted Fisker and Solyndra, a solar panel company that went under shortly after taking loans from the Department of Energy, as examples of the folly of putting government money in start-up companies backed by political allies of President Obama.
Fisker received money from a similar loan program started under the Bush administration.
Fisker was the only car company present, though GM, Ford and other automakers have also taken loans. The Fisker loan represents less than 2 percent of the car-loan program, Democrats told The Associated Press. Fisker, though, has apparently been failing to meet its milestones for these loans since as early as 2010.
The committee is chaired by Darrell Issa (R-Calif.), an especially belligerent member of Congress when it comes to government investments in private industry, entitlements and just about anything supported by the Obama Administration. Issa compared Fisker to Yugo's founder Malcolm Bricklin, Preston Tucker (made famous in the Francis Ford Coppola film Tucker), and asserted that Fisker made mistakes that GOP Presidential Candidate "Mitt Romney would not have made on his first day out of business school."
The DOE recently seized $21 million in a reserve account of Fisker as the company readies for a probable bankruptcy filing. "While this is a hard time for the company's employees and investors, our overall portfolio of more than 30 projects continues to perform well and more than 90 percent of the $10 billion loan loss reserves Congress established remains intact," DOE spokesperson Aiofe McCarthy said.
Opponents of the President and of government investment in green energy don't have to work very hard to make the example of Fisker Automotive look bad to voters. That specific company should never have been on the receiving end of tax-payer investment.
While Fisker only received $192 million of what would have been DOE loans of more than $500 million if it had been able to meet its milestones, the company raised and burned through a total of about $1 billion, according to news reports. The rest was provided by private investment.
All of Fisker's problems beg the question, why did the U.S. invest in this company in the first place?
Five Reasons Why Taxpayers Should Never Have Financed Fisker
1. If Fisker could raise a total of $1.2 billion, with less than 20 percent coming from taxpayers, why involve the taxpayers at all? Private investment, such as that coming from private-equity/venture capital firm Kleiner-Perkins, couldn't have covered the whole nut? Why did the private investors need the tax-payer participation?
2. Start-up car companies are about the highest risk investment a person can make. It takes enormous amounts of capitol to sustain a car company through engineering, development, safety testing, distribution, etc. A lot can go wrong, and ultimately the success of a car company with a new brand is going to depend on how good its marketing is, not how good the technology is.
3. The government has no business staking a car company with no track record. The bailouts of General Motors and Chrysler in 2009 were different cases, because the scale and scope of those businesses were highly intertwined with other supplier companies, dealers, etc. A huge chunk of the economy was riding on the future of GM and Chrysler.
4. Government investment is much better directed at building up the infrastructure to support electric vehicles nationwide, as well as in making batteries less costly. Car companies like Ford, GM, Toyota, Honda and Nissan can make all the EVs and extended range EVs this country is ever going to buy. What they need is batteries to cost less and more charging infrastructure. Supporting and investing in technology companies, such as battery makers or those building fast-chargers, is one thing. And that endeavor is entirely worthwhile. Investment in car companies using that tech is just not necessary or appropriate.
5. All offices of government should look at the optics of investing in a company making products that only the wealthiest three percent or so of households are going to buy. Fisker's cars cost in excess of $100,000, and the model that was going to be built in Delaware with the DOE loans was going to cost around $50K or so. Let the private equity firms, whose executives would be the ones buying these cars, fund the start-up builders.