The Department of Energy finally halted all further loans to the company in June 2011 after having disbursed $192 million of a planned $529 million. (Since then, the government has seized some $21 million from Fisker's accounts.)
The main question at Wednesday's hearing is whether the federal government should have known earlier that Fisker would stumble — or whether this was a reasonable bet that simply didn't pan out, a risk built into the loan program when Congress first set it up in 2007.
Republicans are hitting the first point. "It is hard to understand why the Department of Energy ever thought Fisker was a viable company that should receive taxpayer money," said Jim Jordan (R-Ohio), who chairs the House Oversight subcommittee on economic growth, job creation and regulatory affairs. To that end, the committee released e-mails purporting to show that the Obama administration knew about Fisker's woes back in 2010.
The Obama administration, by contrast, stressed that Fisker was an anomaly. Nicholas Whitcombe, who directed the Energy Department's advanced-vehicle loan program until recently, testified (pdf) that $8.4 billion in advanced-vehicle loans have been given out to five auto companies so far. While Fisker has performed poorly, he said, loans to firms like Ford, Nissan, and Tesla have helped build factories and are all scheduled to be repaid.
Whitcombe also noted that Congress had explicitly provided $7.5 billion* to the advanced vehicle program to cover potential losses and bad loans, thereby acknowledging the "inherent risks of funding new and innovative technologies."
There were fewer details on the initial decision to award the loan itself, however. After unveiling a concept car for the Karma at the North American International Auto Show in 2008, Fisker was first approached by the Bush administration's Department of Energy and encouraged to apply for a loan. (The company was already wooing private backers, including venture-capital giant Kleiner Perkins.)
A year later, the Obama administration finalized a $529 million loan for the company. Fisker's goal was to produce at least 11,000 Karmas by late 2011 and at least 75,000 Ninas by 2012. It was an ambitious goal, and the Wall Street Journal recently reported that the Energy Department had even encouraged Fisker to set its sights higher in order to win approval.
But those goals fell flat. As a lengthy and thorough rundown from GigaOm's Katie Fehrenbacher details, Fisker ran into trouble from the get-go. The company's business model was to design an attractive sports car and then purchase off-the-shelf parts from suppliers. But that unusual strategy carried risks:
Sometimes, those parts had to be custom-made to fit the design vision, which resulted in higher prices for Fisker. Other times, parts were delivered late or, worse, faulty, but Fisker was locked in to those supplier relationships. Sources close to Fisker have also said that many of the parts were owned by the suppliers themselves, so Fisker didn’t own a lot of the internal technology.
The company also ran into a spate of legal problems, supplier issues, and bad luck. The Karmas didn't start rolling off the assembly line until summer of 2011, because of delays in regulatory approval. Some early cars had to be recalled because of battery problems. The Department of Energy finally announced that June that it would cut off all further funding.
Things only got worse from there. In the spring of 2012, Consumer Reports gave the Karma a failing grade after it died on the track. "This is the first time in memory that we have had a car that is undriveable before it has finished our check-in process,” said Tom Mutchler. Then Fisker's main battery supplier, A123 Systems, went bankrupt. And then Hurricane Sandy destroyed 338 Fiskers in storage.
Another key question is whether Fisker's failure can tell us anything about the future of the electric car industry. Over at Scientific American, Seth Fletcher argues that it doesn't really. Fisker is probably an outlier:
[T]he Fisker Karma isn’t representative of the New Electric Car, and it would be a shame if people began to think so.
As in any product category, there are good specimens and bad ones. The Chevy Volt, the Nissan Leaf, and the Tesla Model S are all quick, quiet, well-engineered, technically sophisticated vehicles that point the way toward the future of the auto industry—a future in which drivers can choose what fuel they want to rely on for transportation. The Fisker Karma is just kind of a dud.
Fisker's real legacy may be the damage it has done to federal support for other electric vehicles. The Energy Department still has $16.6 billion available for green car funding under its Loan Guarantee Program and its Advanced Technology Vehicles Manufacturing program.
But those resources have basically been frozen. As a recent report from the Government Accountability Office found, the Energy Department hasn't "closed on a loan or loan guarantee or conditionally committed to do so under either program since September 2011." The reasons? Applicants are skittish about going through a "lengthy and burdensome" application process and facing the same pressures that faced companies like Solyndra and Fisker.
In other words, even if Fisker is an outlier, it's casting a long-shadow over electric-car policy.
* Correction: Congress appropriated $7.5 billion to cover the credit subsidy cost estimate for the advanced technologies vehicle manufacturing program, not $10 billion as originally stated.