Fisker Automotive suspended efforts in Delaware last week to
retool an abandoned GM production plant into a manufacturing
facility for its new electric hybrid NINA, derived from the
$104,000 luxury Karma.
Fisker’s problem is that it is the recipient of a $529 million
loan from the Department of Energy. Having already pocketed $193
million to help push the $104,000 Karma onto the market, Fisker is
now “failing to meet DOE benchmarks” in converting the Wilmington,
Delaware factory into an assembly line for the $40,000 NINA. In the
kind of accounting the government likes in order to show it isn’t
just throwing away money, DOE wanted some proof of performance.
Fisker is already far behind schedule, and so it had to lay off 26
of the 100 construction workers on site and tell subcontractors to
hold the phone. Negotiations on whether DOE will come through with
the second $336 million installment are now expected to take
months.
Pundits immediately pounced, asking whether this was the next
Solyndra. Some said yes, others said no. Yet through all the
editorial fulminating, no one asked the much more obvious question:
Why on earth is the government subsidizing a $104,000 luxury sports
car in the first place?
Fisker Automotive is the brainchild of Henrik Fisker, a
48-year-old Danish auto designer who first made his mark working at
BMW’s advanced design studio in Munich. Among his accomplishments
were the Z07 concept car showcased at the 1997 Tokyo Motor Show and
the exterior of the BMW Z8 roadster. He then headed to Newbury
Park, California, where he founded DesignworksUSA, a BMW subsidiary
concentrating solely on futuristic designs. In 2001 he jumped to
Ford, where he was creative director of Ingeni, Ford’s London-based
design center, then back to California, where he became director of
Ford’s Global Advanced Design Studio in Irvine.
Like many ambitious auto executives before him — John DeLorean
comes to mind — Fisker’s real dream was to build his own car. So
in 2004 he left Ford to found Fisker Coachbuild, a boutique
designer of one-of-kind luxury cars. He also produced the initial
design for the Tesla Model S, the scaled-down version of the
$109,000 Tesla Roadster that is supposed to reach auto showrooms
this year. In 2008, Fisker unveiled his own luxury hybrid, the
Karma, designed to compete with the Roadster at $104,000. Although
still headquartered in southern California, Fisker elected to build
the Karma in Finland at a plant that once produced the Porsche
Boxster and Cayman. Fisker promised to deliver the first Karmas by
2009. He claimed to have 1,300 orders already.
Like all electrics, the Karma would have some severe
limitations. Without its gasoline engine, its range is limited to
35 miles — meaning it only goes 35 miles before requiring another
charge, which can take several hours. Fortunately, it is also
fitted with a 2-liter, turbocharged Ecotec engine that extends its
range to 230 miles and its top speed to 125 mph. The EPA rated the
Karma’s mileage at only 20 miles per gallon for its gasoline
engine, but 52 mpg for full hybrid mode. The company offered
rooftop solar panels that extend the range another four miles.
Time named the car to its “Green Design 100” list in 2009,
before it had even been produced.
Fisker Automotive received initial funding of $500 million from
Kleiner Perkins, Silicon Valley’s premier venture capital firm,
which had started to follow board member Al Gore’s advice in moving
away from computers and into “green” investments. In the old days,
such venture funding primed a company for its initial public
offering, when the early backers would recoup their investment.
Since the Gore era began, however, the target for second-round
investment has become the federal government. Almost as soon as the
Obama administration arrived in 2009, Fisker was at the door with a
proposal for a loan under the Department of Energy’s new Advanced
Technologies Vehicle Manufacturing Loan Program, a $25 billion pot
of money thrown in with the auto bailout of 2008. The investment
fund would allow Washington bureaucrats to point the auto industry
in the right direction. Solyndra, remember, was a loan
guarantee, where the federal government promises to
indemnify private lenders if things go wrong. Fisker received a
check directly from the U.S. Treasury. The first $193 million went
to save the floundering Karma venture, while the next $336 million
would launch the NINA, a “people’s” version of the Karma that would
sell for $45,000 — only $39,000 with federal tax credits.
By October 2009, less than ten months after Obama had taken
office, Fisker signed an agreement to take over an abandoned
General Motors assembly in — wouldn’t you know — Wilmington,
Delaware. Whether Vice President Joe Biden had anything to do with
bringing home the bacon is still anyone’s guess, but the VP was on
hand for the ceremonies, gushing that this cutting-edge green
machine would “only cost $40,000!” As the Fisker press release
described it:
Production is scheduled to begin in late 2012. Fisker Automotive
anticipates Project NINA will ultimately create or support 2,000
factory jobs and more than 3,000 vendor and supplier jobs by 2014,
as production ramps up to full capacity of 75,000-100,000 vehicles
per year. More than half will be exported, the largest percentage
of any domestic manufacturer.… Fisker plug-in hybrid cars will help
remove the country’s dependence on foreign energy by eliminating
the need for 42 million barrels of oil by 2016. They will also
offset 8 million tons of carbon dioxide emissions.
Meanwhile, back in Finland, Fisker was having a little trouble
meeting its Karma production schedules. Although promised for 2009,
the first models did not roll off the assembly line until July
2011. Instead of the 1,300 supposedly already under wraps, the
first delivery to the United States consisted of 239 cars. Six
months later, when a leak in the cooling system that might cause
battery fires prompted a recall, an inventory discovered fewer than
50 cars sold. The rest were still sitting on the lots. To
compensate for poor sales, Fisker upped the price to $116,000.
Not that the green establishment hadn’t given the Karma its
four-star treatment. As Fortune reported, the Karma “has
been celebrated by environmentalists, blessed by the federal
government with a guaranteed loan, and endorsed by celebrities. Leo
DiCaprio ignited a swirl of publicity when he took delivery of the
first production model.… The seating foam is made from soy-based
bio fiber, the carpet backing composed of recycled post-consumer
materials, and the trim sourced from ‘fallen, sunken and rescued
wood,’ including some that has spent the last 300 years resting at
the bottom of Lake Michigan.” Nonetheless, the fanfare hasn’t
produced many sales, and DOE was reportedly concerned about
revenue. Company officials refused to release figures, however, and
the DOE cooperated by blacking out sales numbers in a copy of its
report
released to the
Delaware News Journal.
Whether or not this constitutes “another Solyndra” is still up
to the press to decide. The real question, though, is this: Why on
earth is the federal government subsidizing a $104,000 car being
manufactured in Finland? Supposedly the answer is to promote its
little brother the NINA. But the NINA is barely distinguishable
from the Chevy Volt, which also costs $40,000, has had its own
battery fires, and is selling so poorly that dealers are refusing
further shipments. Autodata Corp. recorded seven months’ worth of
unsold inventory in January. The unheralded Chevy Cruze, on the
other hand, had a poor month in November when it only sold 13,000
cars. The Nissan Leaf is hardly bettering the Volt, selling only
676 in January and 10,000 all last year. The Tesla Roadster —
which received its own $465 million loan from DOE — seems to have
cornered the market for $100,000 hybrids, selling 2,500 in 2011,
although the company is still losing money. But 100,000 NINAs by
2014? Where else but in the federal government would you find
anyone willing to accept such projections?
But the Karma is not just an investment. It is another milestone
in the Obama administration’s effort to build an entirely separate
economy, where coal is forever banished, cars no longer emit
exhaust, and there is a windmill in everyone’s backyard — all
subsidized by the federal government. In that sense, the $193
million thrown at the Karma isn’t really a loss at all. It’s just
another step in watering the shoots of the Green Economy — this
time sprouting in Joe Biden’s back yard.
