Struggling electric car maker Fisker Automotive was a bad bet before the Department of Energy ever awarded it a $529 million green car loan, House Republicans said today at a hearing before the House Subcommittee on Economic Growth, Job Creation, and Regulatory Affairs.
The company is on the verge of bankruptcy after halting production of its Karma hybrid and laying off most of its employees. But evidence suggests Fisker’s financial situation was shaky years ago, and didn’t merit the loan when it was approved in 2009.
Chairman Jim Jordan, R-Ohio, called Fisker a “junk-grade investment.” According to documents obtained by the committee, the car maker had a CCC+ credit rating when it applied, was undercollateralized and worried it would be unable to make payroll.
“It makes no sense to me,” Jordan said. “In fact, I shouldn’t be surprised; all the evidence suggests they shouldn’t have gotten the loan in the first place.”
In fact, Fisker was originally turned down by the DOE’s credit review board because its first proposal dealt only with the Karma, which was made in Finland and would create zero U.S. jobs, according to an internal DOE email. The company reworked its loan proposal to include its plans for a second car, to be made at a Delaware factory.
“Since Fisker had yet to build the first generation models, I thought it was very risky to lend agains the second generation, but that was what was required to meet policy requirements,” wrote Sandra Claghorn, and official with the DOE’s loan program office, in March 2010, a month before the DOE gave final approval for the loan.
Fisker’s production target for the Karma was February 2011, a milestone the company missed by half a year. Nicholas Whitcombe, former acting director of the loan program, told the committee Fisker “represented” they had met their commercial milestone. It took DOE until June 2011 to decide the company had missed its target and halt the loan at $192 million.
In those four months Fisker received $32 million from the DOE.
“There is ample evidence that DOE’s actions resulted in the needless loss of additional taxpayer funds,” said Jordan.
Fisker finally launched the Karma in September 2011, and stopped production in July 2012. Although it purchased a former General Motors factory in Delaware for its second-generation car and spent several years developing the technology, the Delaware plant stands idle and produced no cars.
Henrik Fisker, the company’s co-founder who left the board earlier this year, told lawmakers all federal money was spent in the U.S. for development of its second-generation hybrid, which it called the Atlantic.
He remained optimistic about the loan, telling lawmakers no taxpayer money has been lost yet and Fisker has a chance of paying back taxpayers if it finds a buyer.
If it can’t, the Fisker loan will be the biggest loss of federal money since Solyndra.
The DOE seized $21 million from the company earlier this month in anticipation of default on a payment it owed this week, which it did not pay.