Your Government Money At Work… On a Sports Car

I was out walking at night in River North when I came upon a cool looking sports car outside on the street. I hadn’t seen one of these before so I took a photo to look it up.

When I woke up in the morning and was reading my old-school paper copy of the Wall Street Journal, I saw on the front page of the finance section an article titled “Its Battery Drained, Fisker Hunts for Partner” with a picture of my Fisker Karma in color. Per the article:

Fisker Automotive, the troubled maker of a battery-powered sports car, is accelerating a global search for a strategic partner to keep its business going…Fisker has taken steps to reduce its cash use. In July, it halted production of its sole vehicle, the $110,000 Karma, to lower production costs. The Karma has been hobbled by recalls and quality problems.

Who thought that we needed another sports car, in a market glutted with them? Why the US Government, of course. Per wikipedia:

In 2010, the Department of Energy awarded Fisker a $529 million green-energy loan, primarily to assist the company in transitioning the Karma, which is assembled in Finland, into the American markets. Fisker collected nearly $200 million until February this year, when the government froze the loan because the company was failing to meet the government’s milestones

What is also apparently hurting Fisker is that they can’t obtain batteries from A123 Systems, Inc. Bizarrely, the Wall Street Journal didn’t even mention that NOT ONLY did the US government bankroll Fisker on their futile plan to create another un-neeed sports car, but they also bankrolled A123 Systems in their battery development, per Wikipedia:

The company received US$249 million grant from the Department of Energy for building battery production facilities. As of June 2012, $129M of the grant has been used to build the 550 MWh Livonia plant and the Romulus plant. Remaining untapped $120M grant’s expiry date has been extended from end of 2012 to end of 2014. The company laid off 125 workers in December 2011 as demand for partner Fisker’s automobiles has been slack.

It is astounding to me that the government decided to build up an entirely vertically integrated chain of industry in order to produce a sports car that is unreliable that no one apparently wants to buy. And yet this is likely one of the most tangible “products” that the stimulus package delivered.

Also I am still shaking my head that the normally OK WSJ (for main stream media) didn’t see the further lunacy beyond just Fisker’s imminent demise in that it was linked to the troubles of A123 Systems. A Wikipedia search like yours truly could have figured that out.

Back when I took courses on economics and socialism they spoke of the government’s inability to allocate capital as a core problem with top down socialism. This is exhibit A. It is one thing to prop up an already existing business like the auto industry or banks (not always a good idea) which needs restructuring or a short term cash infusion, but starting an integrated value chain industry from scratch is beyond a longshot, it is lunacy.

Cross posted at LITGM

9 thoughts on “Your Government Money At Work… On a Sports Car”

  1. Mao said it is better to be red than expert. Stalin turned Soviet biology over to Lysenko because Lysenko’s “science” was more in keeping with Leninism than was bourgeois biology.

    Electric cars, like the Fisker, are political projects. Watermelons, i.e. communists in green clothing, believe as did their tyrant heroes, that the only possible reason for the market failure of electric cars, and “renewable” electricity, is obstinate sabotage by evil capitalists and their conservative lackeys.

    Giving these people 4 more years with the keys to the treasury will only result in more fiascoes like Fisker & A123. Since their faith in their politics is completely anchored in their fantasy lives, and is immune to experience and logic, they will continue to do the same things over again.

    In this they are very much like small children who have not yet cast away magical thinking.

    As a dog returns to its vomit, so a fool returns to his folly.

  2. Picking winners and losers is the business Bain Capital was in. Lord Obama said bad things about Bain. Romney pointed out, during the debates, that Obama was good at picking losers. The press and even the bloggers never picked up on Romney’s comment.

    The Obama Doctrine is simple. Punish success and reward failure.

    There is nothing new about the Obama Doctrine. FDR used it. So did Wilson. Almost every West European government uses it. So do the major countries in Asia and Africa. It was used in the Middle Ages and by The Romans, the Chinese, and the Egyptians.

    Indeed, no one will ever been awarded a government medal for getting rich in business nor will anyone be charged zero taxes for having record profits. These rewards are reserved for failures.

  3. Hey. Obama will solve it. Besides, your Bush fantasies about capitalism have been disproved.
    See the great jobs numbers? You’re just envious!

    THE ABOVE is about the kind of straw man “reasoning” I’m reading in the RW blogs now, posted by Leftists. They come to gloat but don’t realize how dumb and gullible they look to us.

    They gloat and glee and the disparage US, because “You lost, we won,” and there’s nothing to be done about it anymore. Zero-man will never face another vote, besides public opinion, and the LSM brooks not real criticism. A perfect echo chamber to narcissists like Obama.

  4. Carl,

    You left out the best part – Fisker’s biggest investor? None other than Al Gore. When Obama picks winners the winner usually has more to do with which of his supporters own the company than anything else.

    We mentioned the Fisker debacle a few years ago on Evolving Excellence.

    At that time, Obama promised to make jobe his #1 priority … right before his administration loaned money to Fisker to create jobe in that hotbed of manufacturing excellence – Finland.

  5. Here is another crazy twist –

    China’s largest maker of auto parts won a politically sensitive auction for A123 Systems Inc , a bankrupt maker of batteries for electric cars that was funded partly with U.S. government money, A123’s investment banker said on Saturday.

    Now we are directly funding companies that the Chinese can buy from us out of the bankruptcy bin.

  6. “loaned money to Fisker to create jobe in that hotbed of manufacturing excellence – Finland.”

    Finland actually has an excellent record in technology and innovation. It has an economy about half the size of Egypt (under Mubarrak, God knows what it is now) with a population that is 5 million compared to Egypt’s 80 million. In 1950 they were similar in per capita terms but, of course, that was the era of the USSR.

  7. Well, yes and no. The Greens have many delusions about the benefits of, and development timelines for, electric vehicles. Per Robert Schwartz: “Electric cars, like the Fisker, are political projects. Watermelons, i.e. communists in green clothing, believe as did their tyrant heroes, that the only possible reason for the market failure of electric cars, and “renewable” electricity, is obstinate sabotage by evil capitalists and their conservative lackeys.” Much truth in that.

    However, a regulatory environment such as California, EPA, and NHTSA directs, requires that the auto industry actively explore plug-in electric, series hybrid, and other such vehicles, and attempt to make them production-worthy. As a new technology, it is likely to be faster developed by a small start-up than by an existing auto giant with much invested in internal combustion vehicles, both financially and intellectually. The argument is that disruptive technologies usually favor fast, flexible upstarts.

    Elon Musk has developed Tesla cars piggybacking innovative electric drivetrains with existing Lotus platforms. Henrik Fisker was somewhat successful in conventional high end car design, and attempted an overly ambitious series hybrid automotive startup. Why not, given the incentives offered by the Feds and their Green activists who insist the technology is only being suppressed by existing automotive and oil interests, against all rational analysis and available evidence?

    Starting production quickly is an enormously difficult proposition, so logically it needed to be subcontracted. One of the very few companies capable of such a task is Valmet in Finland, as Magna in Canada lacked full assembly capability and Steyr Puch in Austria is now captive, and the Turin houses have faded away. The US has never has such contract assembly capabilities in the modern era. Hence the jobs in Finland.

    Alas, the technology is not that simple after all, and betting all the chips on A123 Systems, well-connected as it was, was a foolish choice. Their batteries did not progress as expected and the financial situation was always nonsensical.

    Actually, the WSJ has always been on the mark in arguing that the emissions and fuel economy regulations, CAFE and related doctrines, necessarily result in misallocation of capital and probably actually delay development of electric vehicles.

    But nobody can make electric propulsion make sense as an economic proposition, unless fuel prices are far in excess or current levels.

    By the way, the Fisker Karma is really just a sports sedan, and an excessively heavy and poorly-developed one at that. The first Tesla model was in fact a sports car, but it is now out of production, as is the Lotus model it is based on.

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