Lawmakers probe government loan to Fisker as carmaker struggles

[Rapunzel]

 

http://money.cnn.com/2013/04/24/autos/fisker-government-loan/

Lawmakers probe government loan to Fisker as carmaker struggles
By James O'Toole @CNNMoney April 24, 2013: 7:07 PM ET


NEW YORK (CNNMoney)
With electric-car maker Fisker struggling to stay in business, lawmakers grilled founder Henrik Fisker on Wednesday over the government's $192 million loan to the ailing company.

Fisker laid off most of its employees earlier this month and missed its first loan payment to the Department of Energy on Monday. The Treasury Department has already seized $21 million in an effort to recover some taxpayer funds, but most of the $192 million remains at risk.

Republicans from the Committee on Oversight and Government Reform called Fisker's problems an example of ill-advised government intervention in the private sector, and questioned whether the company had benefited from alleged ties to the Obama administration.

Democrats dismissed these concerns and noted that the DOE loans for alternative-energy-based vehicles have been largely successful, with 98% of the roughly $8 billion awarded to five companies on track to be repaid. Ford (F, Fortune 500), Nissan (NSANF), Tesla (TSLA) and the Vehicle Production Group have also benefited from DOE loans.

Overall, the Department of Energy's clean-energy loan program -- authorized during the Bush administration -- has disbursed $17 billion and faces total losses of up to $780 million should Fisker file for bankruptcy.

While the carmaker could recover some additional funds through asset sales in bankruptcy, it appears in danger of joining solar-panel maker Solyndra as one of the program's high-profile failures.

Rep. Jim Jordan, a Republican from Ohio, said Fisker "never should have received taxpayer money." Noting the $107,850 price tag of Fisker's Karma plug-in sedan, Jordan said taxpayers "effectively subsidized luxury, novelty vehicles for the likes of Justin Bieber, Leonardo DiCaprio and Al Gore."

Jordan and other Republicans also alleged that Fisker backers were in regular contact with Obama administration officials, questioning whether the company had benefited from "crony capitalism."


Henrik Fisker rejected this allegation, noting that he had initially been approached to participate in the Department of Energy program by an official from the Bush administration. Nicholas Whitcombe, an official from the DOE's loan programs office, said the department made funding decisions based only "on the merits of the transaction."

"We conduct rigorous due diligence to protect taxpayers' interests," he said.

Democratic lawmakers noted that one of Fisker's key backers had contributed money to Republican political candidates, accusing GOP committee members of partisan grandstanding. Rep. Gerald Connolly of Virginia likened the proceedings to "a Soviet show trial."

Fisker suspended production of its only car, the Karma, in February. That followed a recall of most of the cars built in the second half of last year due to a possible problem with their battery-cooling systems and negative reviews from Consumer Reports.

The Energy Department originally promised Fisker $529 million three years ago. But as the company quickly fell into financial trouble, the department pulled back on that commitment and halted loan disbursements to Fisker in June 2011, after it had received $192 million.

Fisker has been seeking new investors to help revive its business, but has been unable to get back on track with the planned production of a smaller, less expensive plug-in sedan.

[Rapunzel]

Fisker had triple C rating and no one would loan them money when Obama loaned it to them through the department of energy..... the head guy sits on Obama's jobs council and yet we are supposed to believe they never spoke about the loans..... another investor was none other than AL GORE.......

http://online.wsj.com/article/SB125383160812639013.html

    September 25, 2009

Gore-Backed Car Firm Gets Large U.S. Loan

WASHINGTON -- A tiny car company backed by former Vice President Al Gore has just gotten a $529 million U.S. government loan to help build a hybrid sports car in Finland that will sell for about $89,000.

The award this week to California startup Fisker Automotive Inc. follows a $465 million government loan to Tesla Motors Inc., purveyors of a $109,000 British-built electric Roadster. Tesla is a California startup focusing on all-electric vehicles, with a number of celebrity endorsements that is backed by investors that have contributed to Democratic campaigns.

Fisker's Karma hybrid sports car, above, will initially cost about $89,000.

The awards to Fisker and Tesla have prompted concern from companies that have had their bids for loans rejected, and criticism from groups that question why vehicles aimed at the wealthiest customers are getting loans subsidized by taxpayers.

"This is not for average Americans," said Leslie Paige, a spokeswoman for Citizens Against Government Waste, an anti-tax group in Washington. "This is for people to put something in their driveway that is a conversation piece. It's status symbol thing."

DOE officials spent months working with Fisker on its application, touring its Irvine, Calif., and Pontiac, Mich., facilities and test-driving prototypes.

Matt Rogers, who oversees the department's loan programs as a senior adviser to Energy Secretary Steven Chu, said Fisker was awarded the loan after a "detailed technical review" that concluded the company could eventually deliver a highly fuel-efficient hybrid car to a mass audience. Fisker said most of its DOE loan will be used to finance U.S. production of a $40,000 family sedan that has yet to be designed.

"It's the ability to drive significant change in fuel economy across a large market segment" that swayed the department to approve the Fisker loan, Mr. Rogers said. "We got quite excited."

Henrik Fisker, who designed cars for BMW, Aston Martin and Tesla before starting his Fisker Automotive in 2007, said his goal is to build the first plug-in electric hybrids that won't sacrifice the luxury, performance and looks of traditional gas-powered luxury cars.

The Karma will target an exclusive audience -- Gore was one of the first to sign up for one. Mr. Fisker says all new technology starts out being expensive. He pointed to flat-screen televisions that once started at $25,000 but are now affordable to the mass market.


The four-door Karma, powered by a lithium-ion battery, will be able to run solely on electric power for 50 miles, and will achieve an average fuel economy of 100 mpg over the span of a year, the company says. Production is scheduled to start in December, with about 15,000 vehicles a year expected to hit the U.S. market starting next June.

Many of the 1,500 people who have made deposits on the Karma are former BMW and Mercedes owners who want an environmentally friendly car without sacrificing luxury, Mr. Fisker said.

He said he pitched the Karma to Mr. Gore at an event hosted by KPCB last year, and that the former vice president almost immediately submitted a down payment for the car.

Kalee Kreider, a spokeswoman for Mr. Gore, confirmed that the former vice president backs Fisker and purchased a Karma. "He believes that a global shift of the automobile fleet toward electric vehicles, accompanying a shift toward renewable-energy generation, represents an important part of a sensible strategy for solving the climate crisis," she said in a statement.

Fisker's top investors include Kleiner Perkins Caufield & Byers, a veteran Silicon Valley venture-capital firm of which Gore is a partner. Employees of KPCB have donated more than $2.2 million to political campaigns, mostly for Democrats, including President Barack Obama and Hillary Clinton, according to the Center for Responsive Politics, a nonpartisan group that tracks campaign contributions.

Officials at Kleiner Perkins didn't return requests for comment.

Asked whether Mr. Gore had any influence on Fisker's application, the DOE's Rogers said, "None at all."

"This is a very attractive, very across-party-lines kind of vehicle," Mr. Rogers said. "All of the detailed due diligence [was] done by independent review teams."

Other Fisker investors include Eco-Drive (Capital) Partners LLC, an investment consortium, and Qatar Investment Authority, a state-run investor based in Qatar.

Fisker's government loans will come from a $25 billion program established by Congress in 2007 to help auto makers invest in the technology to meet a new congressional mandate to improve fuel efficiency. In June, the DOE awarded the first $8 billion from the program to Ford Motor Co., Nissan Motor Co., and Tesla, which are all developing electric cars.

Some companies that have been turned down for loans from DOE say they did not get much feedback from the department about their applications. O. John Coletti, president of EcoMotors International of Troy, Mich., said his company applied for a $20 million loan from the agency last December, and last month got a one-page rejection letter from the loan program's director, Lachlan Seward. EcoMotors' lead investor is Vinod Khosla, himself a former Kleiner Perkins partner and a longtime campaign contributor to Republicans and Democrats alike.

"I don't have an issue with the winners … it's possible somebody has better ideas than us," Mr. Coletti said. At the same time, he said, "More feedback from DOE on a timely basis would be wonderful. When you're running a business you'd like to know whether you're going to be able to take advantage of this opportunity."

Mr. Coletti's company -- which makes diesel engines and is still waiting to hear from the Department on a separate loan application to help it build a manufacturing facility -- isn't without politically well-connected patrons, either. Its major investor is Vinod Khosla, himself a former Kleiner Perkins partner who has donated to campaigns.

Scott Redmond, CEO of XP Vehicles Inc., said he met with DOE officials twice in Washington after applying for a $40 million loan to develop a $15,000 to $25,000 hybrid, and that both times he was told his application looked good. Since receiving a rejection letter from DOE in August, Redmond said, he has been unable to get a full explanation as to why his request was turned down.

Mr. Rogers said he was not at liberty to discuss individual applications that had been turned down, but said the process has been handled fairly and objectively.

[Rapunzel]

www.caesarrodney.org/.../IS_FISKER_AUTOMOTIVE_FRISKING_TA..

IS FISKER AUTOMOTIVE FRISKING TAXPAYERS?

Supported by Al Gore and Joe Biden, Fisker Automotive received a $528.7 million loan from the U.S.
Department of Energy and has announced plans to produce an electric premium sports car at the former GM Boxwood plant in Delaware. Fisker says that cars will begin rolling off the assembly line in late 2012 and by 2014 production of 75,000-100,000 units a year will require the employment of 2000 "factory" workers
.
How feasible is all this?

The leadership team of Fisker Automotive is quite capable. CEO Henrik Fisker has been designing luxury sports cars for 20 years. Fisker was CEO of BMW's DesignworksUSA and Director of Ford's Global
Advanced Design Studio (Aston Martin). COO Bernhard Koehler spent 22 years at BMW, rising to Director of Operations, and joined Fisker at the Ford Design Studio as Director of Business and Operations.

Production seems feasible but mass production is a question mark. To date Fisker has focused on building tailor made cars based upon high end platforms from BMW and Mercedes-Benz. Shifting into mass production means climbing a new learning curve.

Competition in the hybrid market is fierce. All the major automobile producers are moving into the hybrid market. By 2015 GM plans for 26 out of 33 models to be some form of hybrid. Chrysler plans to have 8 hybrid or electric vehicles by that year. The current U.S. hybrid market averages across the business cycle 25,000 cars per month (300,000 per year). Three quarters of the sales are Toyota's Prius or Lexus, with Prius accounting for 55% of the total hybrid market. Ford and Mercury (Fusion, Milan) currently have a 9% market share, with Honda at 8% and GM at 5%. Sales have dipped during the recession and are directly influenced by the price of gas.

Will the market support Fisker's 2014 sales projection? U.S. car sales should top 8 million by 2014. If the hybrids share of cars rises from its current 1% and climbs to 5%, hybrid sales in 2014 will be around 400,000. This means that Fisker, with a limited retail and service network and no established reputation, will capture 19% to 25% of the U.S. hybrid market. Should 50% of Fisker's cars be sold as exports, the highest proportion of exports for any current American company, Fisker is assuming a U.S. hybrid market share of 9% to 13%, greater than the current shares of Honda and GM.

And this assumes that Fisker will be selling across the hybrid market spectrum. At this point Fisker is
targeting the luxury sports car segment, and perhaps, eventually, the luxury sedan segment. Luxury sports cars are where Fisker and Koehler have expertise. The current Fisker price point is $40,000 after a $3,000 to $4,000 federal tax credit. The current price for a Prius is $22,000. Honda Insight sells for around $20,000 and the hybrid civic for $26,000. The lower tier Lexus HS250 hybrid sells for $34,000 and annual sales are 1,600 cars at this time.

Based upon current information, Fisker's projected sales seem to be a stretch. In addition, the states with the highest hybrid sales are California, New York, Florida and Texas (in rank order). Three of the four current major markets are a considerable distance from Delaware. Moreover, with current technology, intensive driving (not just trips to work and to school) and gas at $5.00 per gallon, the estimated pay back on a hybrid is decades.

On the positive side, gasoline prices may be above $5.00 per gallon by 2014. A weak dollar will also
facilitate exports to Europe, although there isn't much demand for luxury hybrids in the Czech Republic,
Hungary and Poland. Sensitivity to the environment is income elastic and should rebound with financial
markets.

What is the bottom line? Vice-president Biden has made an offer that Fisker cannot refuse. One-third of the $528 million loan will go to renovating the Boxwood plant and will spillover to Delaware construction contractors. The new operation is unlikely to achieve its 2014 production goals and will never employ 2,000 workers in Delaware. The more than $5,000 of Department of Energy funds per car is unlikely to be "repaid with interest" and taxpayers will also bear the tax credit burden per car of $3,000 to $4,000. The demand for oil will not be significantly impacted unless electric utilities find alternative fuels. The project may be, however, one more stepping stone in the development of alternative automotive technology. This will benefit the nation, but does not merit any subsidies from

Delaware citizens.

Dr. John E. Stapleford is a member of the Caesar Rodney Institute’s Board of Directors.
The Caesar Rodney Institute is a 501(c)(3) non-partisan research and educational organization and is
committed to being a catalyst for improved performance, accountability, and efficiency in Delaware
government.

[Oceander]

Fisker laid off most of its employees earlier this month and missed its first loan payment to the Department of Energy on Monday. The Treasury Department has already seized $21 million in an effort to recover some taxpayer funds, but most of the $192 million remains at risk.

Let's fix that second sentence there, shall we?

The Treasury Department has already seized $21 million in an effort to recover some taxpayer funds, but most of the $192 million remains at risk will never be recovered.

Done.

[Cincinnatus]

I see a bad moon rising: By 2015 GM plans for 26 out of 33 models to be some form of hybrid. Chrysler plans to have 8 hybrid or electric vehicles by that year.

Taxpayers, beware.