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For weeks now the buzz about Fisker Automotive, the latest Department of Energy-funded clunker, is that two China-based automotive companies – Zhejiang Geely Holding Group (which owns Volvo) and Dongfeng Motor Corp. (which is state-owned) – were in bidding negotiations to buy an ownership stake of an unknown size. The speculation was that Fisker was following a similar path as stimulus-financed A123 Systems, which supplied the batteries for Fisker and was recently bought by Sino-owned Wanxiang Group.
But what seemed like the inevitable has been halted if a Wall Street Journal report (subscription-only) from Tuesday is to be believed. Apparently Fisker’s management still thinks it can access the remainder of a $529-million DOE loan, which it had received a portion of ($193 million) before its shortcomings forced the feds to say “no mas.” According to one of the newspaper’s sources, Fisker negotiators proposed to the Chinese that they draw the remainder of the loan as part of a deal, which they say (at least in part) scuttled Geely’s and Dongfeng’s interest in the company.
Why? Because as a condition of the DOE loan, Fisker would be required to manufacturer its next model – the Atlantic – at a refurbished General Motors plant in The First State that had been closed for years.
“The Delaware plant is big, old and expensive,” the Journal reported, citing an unidentified source, “and the Chinese balked at the U.S. loan because they don’t want to be compelled to build cars there.”
And according to another report by Reuters, Geely totally withdrew its interest in Fisker because of the DOE’s Delaware requirements.
“Those obligations are too complicated to handle and seem too risky,” said a Reuters source. “The plan’s footprint was too big. It would take a long, long time to fill up the plant with products and restore employment there.”
Whoa! So the communist Chinese – who haven’t met a government-mandated “green” project they can’t subsidize and love – won’t do a deal with Fisker, even though the U.S. government has deemed the Delaware plant worthy of taxpayer “investment?” How are these Far East entrepreneurs missing the Obama administration’s keen vision and business acumen?
After all, this was the plant where Vice President Joe Biden made a personal appearance in October 2009 to announce how the future of electric cars – sparked by the know-how of founder Henrik Fisker and investment from the Recovery Act – was going to burst forth from the remnants of that shuttered GM factory on Boxwood Road in Wilmington.
“While some wanted to write off America’s auto industry, we said no,” Biden said at a ceremony that also featured Democrat Gov. Jack Markell, Democrat Sen. Tom Carper, and Republican Rep. Mike Castle. “We knew that we needed to do something different – in Delaware and all across the nation. We understood a new chapter had to be written, a new chapter in which we strengthen American manufacturing by investing in innovation. Thanks to a real commitment by this Administration, loans from the Department of Energy, the creativity of U.S. companies and the tenacity of great state partners like Delaware – we’re on our way to helping America’s auto industry reclaim its top position in the global market.”
Sounded like a can’t-miss plan, right? According to the 2009 White House press release, $359 million of the DOE loan was going to “revive manufacturing at the Boxwood Plant.”
“This is proof positive that our efforts to create new jobs, invest in a clean energy economy and reduce carbon pollution are working,” said Energy Secretary Steven Chu at the time. “We are putting Americans back to work and reigniting a new Industrial Revolution that is paramount for the economic success of this country.”
And yet somehow the Chinese are missing it. But Geely and Dongfeng may also have been put off by the internal dissent between Henrik Fisker and CEO Tony Posawatz. According to another Reuters report, the two executives disagreed over the continued pursuit of DOE funds, which is reportedly favored by Posawatz and understandably opposed by Mr. Fisker. After all, the initial $193 million in taxpayer support was a magnet for media scrutiny and resultant additional headaches. So because of what Mr. Fisker called “several major disagreements” with executive management over direction, he quit as chairman of his own company last week.
“What happened after Solyndra obviously has shifted unfortunately the discussions — rather than talking about … that everybody wants America to be the leader in new technology, it shifted to being more political focused,” Fisker told The Detroit News after he resigned. “That’s a situation everyone’s going to have to deal with.”
Everyone will except Geely and Dongfeng, who don’t need Fisker as much as Fisker needs them. Besides the financial considerations and the Delaware burden, the Anaheim automaker also has a trunk-load of excess baggage. Fisker has suffered a series of publicity blunders including recalls, a breakdown of its Karma model at Consumer Reports’ test facility, layoffs, a SEC investigation of its primary venture capital raisers and subsequent punishment of them by an arbitration board. Not surprisingly, Consumer Reports in September pegged the Karma as the worst luxury sedan on the market, and fourth-worst sedan overall. During the review process the publication reported it had to send its model back to the dealer for repeated problems such as frequent instrument, window and radio glitches, and recurring warning lights.
And the perception that the Delaware plant is too big and old isn’t the only problem there, either. The state made a $21.5 million incentive agreement with Fisker as well, and according to The Delaware News Journal, Gov. Markell says the state must continue to make payments under the deal he arranged. The state has paid at least $6 million for the company’s grant already, and as of last August Delaware taxpayers were stuck paying more than $400,000 (presumably more now) in utility bills, even though the factory is vacant.
Considering all these factors, maybe it is presumptuous to think China would bite on the “opportunity” to buy Fisker anyway, Delaware or no Delaware. And even if they did, it might be assuming too much to think the U.S. government would go along with Chinese ownership (although it didn’t raise much objection with the bankruptcy sale of Fisker’s battery maker, A123 Systems).
But then again, being in the electric vehicle business means never having to prove yourself. The Obama administration has taught us that you only have to presume you will succeed.
Paul Chesser is an associate fellow for the National Legal and Policy Center and publishes CarolinaPlottHound.com, an aggregator of North Carolina news.
[First published at the National Legal and Policy Center.]