Fisker, electric carmaker backed by $529 million U.S. loan, balks at Solyndra comparison
By Carol D. Leonnig and Joe Stephens,
An electric car company backed by more than a half-billion dollars in Department of Energy loan guarantees has missed early manufacturing goals and has gradually pushed back plans for U.S. production and the creation of thousands of jobs.
This week, Fisker delayed until 2013 the production of the moderately priced family car it plans to build in Delaware. It also learned that its Finnish-produced luxury model, the $96,000 Karma, which is two years late in reaching U.S. markets, failed to meet a promised energy-efficiency standard.
With the demise of Solyndra, a solar company that also won a half-billion-dollar loan from a program to spur clean-energy technologies, the Energy Department’s loan guarantees have come under intense scrutiny, and the Obama administration has been under fire for making risky loans to unproven ventures. The administration has stood behind the lending, some of it funded by stimulus, saying that risk is inherent in backing emerging technologies.
Fisker was among the big winners in the administration’s effort for broader development of electric vehicles, and company officials said their problems bear no resemblance to those of Solyndra, which filed for bankruptcy protection in September.
“Without any excuses, yes, we did have some delays,” company co-founder Henrik Fisker said during a stop in the District this week to show off his company’s sleek new Karma. “But this is completely different. You can’t compare at all.”
The Energy Department confirmed this week that it has eased expectations after conditionally approving the loan to Fisker and has made allowances for scaling back projections in the final loan agreement. But the agency declined to make public those adjusted terms, including projected car sales volume or milestones the company must meet in connection with its $529 million loan. Agency officials attributed Fisker’s delays to regulatory hurdles and issues beyond the company’s control.
Henrik Fisker said in an interview Wednesday that, as of this week, the Karma had been cleared for sale in the United States. Forty have arrived from Finland to be delivered to dealers, and four identical silver versions of the low-slung sedan were parked outside the District’s Mandarin Oriental hotel.
“Next year we will reach the 12,000 or 15,000 vehicles we predicted,” Fisker said. “We are really past the start-up risks. That means the skeptics who said we would never produce a car were wrong.”
Energy Secretary Steven Chu was ebullient in September 2009 when he announced the Obama administration’s conditional backing for the California-based start-up.
“This investment will create thousands of new American jobs and is another critical step in making sure we are positioned to compete for the clean-energy jobs of the future,” Chu said in a statement at the time. He and President Obama had used similar language when heralding the future of Solyndra.
The Fisker commitment was questioned by some from the start, partly because of the company’s political connections. A key investor is a venture capital firm, Kleiner Perkins Caufield & Byers, whose partners include former Democratic vice president Al Gore. The investment house raised $2 million for Obama’s 2008 presidential campaign.
Fisker’s deal also generated controversy when the company announced that it planned to build its luxury model in Finland because it could not line up a U.S. contract manufacturer. The Energy Department, reacting this week to an ABC News report on Fisker’s Finnish operation, stressed that loan proceeds are going exclusively to U.S. suppliers, not to the Finnish manufacturer.
As a condition for receiving the federal help, Fisker had agreed to build its less-expensive family sedan in the United States. But the company was near the end of the loan approval process before it scrambled to find a manufacturing plant, according to internal e-mails first obtained by Judicial Watch. The White House helped the company quickly locate one in Delaware, Vice President Biden’s home state. Biden announced the decision during an October 2009 news conference in Wilmington.
Energy Department officials said Fisker’s loan included $169 million to support engineering work for the Karma that was done in the United States, mainly at Fisker’s headquarters, which has 700 employees.
Another $359 million loan segment supports production of the Fisker Nina, which will be built at a former General Motors plant. Fisker has 100 workers at the Delaware site and says it plans to employ 2,500. Roger Ormisher, a Fisker spokesman, said Friday that the company originally projected to start full production of the Nina in late 2012 but alerted the Energy Department during its final loan negotiations that production would more likely begin in mid-2013.
“Each of these projects, like the loan program itself, has received strong bipartisan support,” Energy Department spokesman Dan Leistikow said in a statement. “More importantly, both were approved on the merits after extensive review by the Department’s loan program office. They represent exactly the type of cutting edge, innovative manufacturing this program was intended to support.”
In applying for the federal help, the company promised it would produce and sell at least 11,000 Karmas by the end of last month. Energy Department staff members declined to comment on changes between the conditional agreement and the final loan but said that number of cars is no longer required.
Obama once pointed to Fisker and other entrepreneurial ventures as part of his campaign to put a million electric vehicles on the road by 2015. The Energy Department’s loans to Fisker and its chief competitor, Tesla Motors, totaled $1 billion.
This week, Fisker learned its product couldn’t deliver on its efficiency pledge — the car cannot travel solely on electricity for a 50-mile stretch. That adds to the many hurdles standing between the company and profitability.
Experts said there is little room for error if Fisker hopes to repay its $529 million loan.
“There is a tremendous amount of risk associated with all of these electric vehicle companies,” said Kevin C. See, an auto industry analyst with Lux Research in Boston. “There is a very real possibility that a lot of these players in the electric vehicle industry may not be there when this all shakes out.”
The company’s co-founder waves away such concerns.
“Analysts said two years ago that it couldn’t be done,” Fisker said, accelerating as he navigated a Karma through downtown traffic. “Well, here is the car!
“We’ve raised $600 million in private equity,” he said. “You have to ask, why would they invest if they didn’t think we had a good product?”
The prospect of federal backing helped encourage private investment in Fisker. It previously reported raising $25 million, with Kleiner Perkins as a key investor. But in September 2009, the same month the federal loan guarantee was announced, it raised $65 million more, led by an investment arm of the wealthy Middle Eastern nation of Qatar and joined by Kleiner Perkins and Palo Alto Investors.
Fisker said he’s not worried about trying to sell his luxury model while the U.S. economy struggles. He said the car’s looks, energy efficiency and luxe features — some say it resembles a Maserati — could justify a much higher price.
“We see so much interest. We’re very confident,” Fisker said of the pricing, adding that he won’t sell the cars at discount. “How often do you go into a Louis Vuitton store and see the prices lowered?”