A good example of why companies should avoid taking government money if they can: even if the government doesn't impose a lot of restrictions on you upfront, the press will retroactively.
pg, we need a clearer voice against these types of loan schemes. In the Fisker deal, the Qatar state put up a fraction of the U.S. govt investment, and is getting equity in return. The U.S. taxpayer has nothing but downside and is actually underwriting the risk in Fisker for the venture investment of players like Kleiner Perkins, Qatar, and Palo Alto Investments. It is corrupt.
Does it matter? I mean sure some people will hate you but properly not enough to lynch you. I would it imagine it would be worse for a start-up to be unknown that to have free publicity, even if it was negative.
I don't know how much it matters, to be honest. Depends how big a distraction it is for the company. E.g. I'd guess this news story is not the last they'll hear about it. Republicans will presumably use this as a stick to beat the administration with.
Ish. According to a response article* , the DOE loan is earmarked to only be used for spending within the US. The company in question also has a Delaware plant that they bought from GM and are in the process of hiring for and upgrading.
I have moderately high hopes for Tesla, but I really can't see Fisker being a success.
It's weird-looking, expensive ($100K), has a very limited electric range (32 miles) and is incredibly fuel-inefficient (20mpg) once the battery runs out.
Furthermore, unlike Tesla, they don't seem to have a firm plan to proceed from a low-volume luxury model to a higher-volume cheaper model.
Besides, Tesla seems to have the rather limited "I'm a rich dude who wants to show how much I care about the environment by driving around in an expensive electric car" market sewn up pretty well. And the Nissan Leaf and Chevy Volt are far cheaper, generally better, and I'd trust 'em a lot more.
The only real question is how many Karmas will get built before Fisker goes bankrupt taking $528 million of US taxpayer money with it.
Car manufacturing is a really hard business to break into. If you look at the world's big car companies, they've practically all been around since the 1920s, and possibly slightly before. Kia was founded in 1944. I can't think of any companies (aside from offshoots of existing car or related motorized equipment companies) that have been sucessfully founded since the end of WW2.
Honda was founded in 1948 - which does qualify just!
Proton : formed by the Malaysian government in 1983. Yes- government created so not a fair comparison.
Perodua : other Malaysian manufacturer.
Both exist under a heavy tariff protection scheme, so possibly not good examples.
Pagani : started selling with no govt backup or protection in 1991. Very high priced, but similar market to Fisker.
Koenigsegg : created in 1994, again high priced.
Mclaren : created in 1989 as an offshoot of the racing team.
To be fair both McLaren and Pagani get assistance with engines from larger manufacturers.
There are a few more specialty/small manufacturers that have been created and still exist.
I think your original point stands that no new mass-production car companies have been created without severe government intervention.
Some of the chinese manufacturers would be interesting to study from this point of view.
I'm not sure why this is - I suspect it's related to the massively high fixed costs, but also the huge amount of government intervention that goes on in the vehicle market. There's not a market in the world that isn't affected by some type of regulatory requirements, tariff and trade protectionism etc.
I think vehicle manufacture is a bit like airlines in that many people seem to want to be involved for reasons other than making a profit.
The only one I can think of is Lotus...founded in late 50s.
The others Land Rover, Hummer, MINI etc, were all bought by others. Tata also counts...but they are part of a conglomerate that's been in business since mid 1800s
> Tesla seems to have the rather limited "I'm a rich dude who wants to show how much I care about the environment by driving around in an expensive electric car" market sewn up pretty well.
I've always wondered about that. Tesla only shipped about 2500 Roadsters before they were discontinued. I find it hard to believe that there isn't demand for 2500 units per year of a unique, high-performance car like the Roadster in California alone. It seemed like the real constraint was Tesla's inability to produce them in volume, or make money doing so.
I am willing to stand up to be a customer of Fisker, but not of Tesla.
I have places I go that are > 200 miles from home. I want to drive my fun car to these places. The Tesla can't do this. I can never be a customer of Tesla's with this restriction.
I will be buying the convertible Fisker Karma if they ever get to the point of selling it!
I have moderately high hopes for Tesla, but I really can't see Fisker being a success.
I have moderately high hopes for Honda, but I can't really see toyota being a success. Why don't we just have one company succeed and the rest of them can just go to hell. Why is it always a zero sum game?
Oh, I looked it up. Apparently it's an assumption of the risk if the company defaults. So if I'm understanding this correctly, from the US Government's point of view it has all the risk of giving them a loan (we're on the hook if they default), with none of the upside (if they pay it back we don't get the interest). Right?
If this is successful, the US government gets taxpayers and people out of unemployment lines. There is an upside, but not directly from the payback of the loan.
This money is taken from private sector, profitable companies like Google and Apple, and is given to politically connected, trendy companies like Solyndra. Politically directed investment increases unemployment because the incentives are all wrong and the resources are invariably wasted. Private markets do a far better job allocating capital than governments-- that's the overwhelming economic lesson of the 20th century.
It is corruption, a form of "venture socialism" where politically connected donors get money with no-strings-attached. It's heads I win, tails, the taxpayer loses. This form of government-driven investment is a dramatic departure from 200 years of American tradition. Nobody really noticed because a lot of these programs were created by George W Bush, with Democratic support, and the media cheerleading anything "green".
There are plenty of examples of these types of government backed deals. Disneyland being one of the most famous that nobody talks about but the tradition predates 'corporations' with the 'East India Company' being the both the first example of a large multi-national company and probably the most blatant example. Some of this is infrastructure like oil pipelines, but homestead land grants are both classic American expansionism and free handouts at the same time.
Homestead land grants cost taxpayers nothing and went to small family farmers. That's nothing like half-billion dollar taxpayer loans directed by politicians in Washington.
After the film, it was explained that for Disney World, including EPCOT, to succeed, a special district would have to be formed: the Reedy Creek Improvement District with two cities inside it, the City of Bay Lake and the City of Reedy Creek (now the City of Lake Buena Vista). In addition to the standard powers of an incorporated city, which include the issuance of tax-free bonds, the district would have immunity from any current or future county or state land-use laws. The only areas where the district had to submit to the county and state would be property taxes and elevator inspections.[1]
Compare to, say, the budget of the National Renewable Energy Laboratory in Golden, Colorado.
For five hundred million dollars, you can get, say, five thousand man-years worth of actual research. As opposed to a business that makes a few funny-looking sports cars for rich people and then goes broke.
Well yes, but not really. True the government won't get interest directly but, because it can only be spend inside the US, they do get the secondary effects.
Think of it as trying to do what the stimulus should have done, leveraged quite a bit (because you only need to pay out what it cost to cover the loans that go bad).
Considering this, I think it is a good move,
"He said the decision, ultimately, was to help prevent his company from following the path of Solyndra, which exhausted nearly all of its loan money on a high-tech solar manufacturing plant in Freemont, California. "
I'd seriously consider getting a mid-sized electric SUV, but these small sport cars are just plain useless. However, I understand that for novel products like electric cars it's best to start by marketing them to people who can afford them and who can influence others to buy them...
And the headline is just misleading (like most headlines on Yahoo News): not only did the company say they've spent the money in the US, they actually can't spend them outside the country...
