Four years prior, the Obama administration’s Department of Energy (DOE) aimed to jumpstart the electric vehicle (EV) industry. They green-lit a substantial half-billion-dollar loan to Fisker Automotive, a promising California startup. The vision was clear: cutting-edge electric cars rolling off assembly lines, creating thousands of American jobs.
In October 2009, Vice President Joe Biden stood at a Delaware plant, once dormant, soon to be revitalized by electric car production. “We’re making a bet in the future,” Biden declared, emphasizing the administration’s “bet in innovation” through companies like Fisker Automotive.
However, the envisioned future for Fisker Automotive never materialized. Thousands of sleek plug-in cars remained a dream, and the promised jobs never appeared. This month, Fisker Automotive filed for Chapter 11 bankruptcy protection, becoming a stark symbol of the broader challenges faced by the Energy Department’s ambitious electric car program. While Tesla Motors, another recipient of DOE funding, successfully navigated the nascent EV market, Fisker Automotive’s journey took a different, less fortunate turn.
The Promise Versus the Reality: Obama’s EV Dream and Fisker’s Fall
The Energy Department’s investment in Fisker Automotive was part of a larger strategy to accelerate the adoption of electric vehicles in the United States. The Advanced Technology Vehicles Manufacturing (ATVM) Program, a cornerstone of President Obama’s energy policy, aimed to put 1 million EVs on American roads by 2015. Fisker Automotive was intended to be a flagship example of this initiative.
In 2011, investigations by The Center for Public Integrity and ABC News raised concerns about the DOE’s $1 billion wager on Fisker Automotive and Tesla, highlighting the inherent risks in backing politically connected but unproven electric car manufacturers. While Tesla eventually thrived and repaid its loan early, Fisker Automotive struggled from the outset.
The DOE allocated $529 million to Fisker Automotive but ultimately disbursed $192 million before halting payments due to missed milestones. Of the disbursed amount, the DOE stated it recovered only $53 million, leaving a significant portion of taxpayer money potentially unrecovered. The Fisker Automotive case underscores the precarious nature of investing in innovative but high-risk ventures, even with government backing.
Loan Details and Program Shortcomings: Examining the ATVM and Fisker’s Financing
The ATVM program, under which Fisker Automotive received its loan, was designed to foster American competitiveness in the burgeoning global market for advanced, fuel-efficient vehicles. The DOE touted the program’s broader success, claiming over $8 billion in loans supporting tens of thousands of jobs and reducing dependence on foreign oil. They emphasized U.S. leadership in innovative vehicle technologies, including plug-in and high-efficiency gasoline vehicles.
Despite acknowledging the Fisker Automotive loss as “not what anyone hoped,” energy officials downplayed its significance, stating it represented “less than two percent of our advanced vehicle loans.” The DOE defended its safeguards, asserting that disbursements to Fisker Automotive were stopped in June 2011 due to the company’s failure to meet established milestones.
However, the ATVM program itself has faced criticism for not achieving its intended goals. Government Accountability Office (GAO) reports in 2011 and 2013 pointed out that the program had not issued a loan in two years and had spent only a fraction of its $25 billion congressional allocation. A further $7.5 billion was allocated for credit subsidy costs, with $4.2 billion remaining unused, according to the GAO. Manufacturers reportedly found the program’s costs outweighing its benefits, hindering its effectiveness in supporting companies like Fisker Automotive.
Setbacks and the Downfall: Why Fisker Automotive Failed to Deliver
Fisker Automotive’s ambitious plan hinged on producing the luxury Karma and a more affordable model, the Atlantic, with the help of the $529 million loan guarantee. However, as co-founder Henrik Fisker testified to the House Committee on Oversight & Government Reform in April, a series of unforeseen obstacles derailed the company.
These setbacks included slow regulatory approvals, recalls, and financial troubles at key suppliers. Fisker Automotive aimed to be a pioneering American car company, setting new standards for low-emission technology and cutting-edge design. Despite this vision, the accumulation of challenges proved insurmountable for Fisker Automotive.
Following Fisker Automotive’s bankruptcy filing, Hybrid Technology acquired its assets, including a $25 million repayment towards the DOE loan. In its bankruptcy filing, Fisker Automotive estimated assets between $100 million and $500 million, while liabilities ranged from $500 million to $1 billion, highlighting the deep financial distress of Fisker Automotive at the time of its collapse.
Broader Implications and Criticisms: Government’s Role in Green Tech Investments
The Fisker Automotive saga is part of a larger $30 billion green energy portfolio, intended to diversify America’s energy sources, stimulate domestic industry, and enhance U.S. competitiveness in the global advanced vehicle market. However, Fisker Automotive is not an isolated case. Several other DOE-funded firms, including solar panel maker Solyndra, have also declared bankruptcy.
Reports have emerged of green energy companies, even those struggling financially, awarding substantial bonuses to executives before filing for bankruptcy, raising further questions about oversight and accountability in these programs. The Energy Department estimates losses across its portfolio to be approximately two percent, which they argue is within acceptable limits.
However, congressional critics view Fisker Automotive’s bankruptcy as “yet another sad chapter” in the DOE’s green energy investments. They argue that promised jobs failed to materialize and taxpayers are left bearing the burden of “reckless gambles.” The Fisker Automotive failure reignites the debate about the appropriate role of government in financing high-risk startup ventures with public funds.
Expert Perspective: Questioning the Structure of Government Subsidies
Doug Koplow, founder of Earth Track, a firm specializing in energy subsidies, has long questioned the DOE’s allocation of taxpayer money. He expresses little surprise at bankruptcies like Fisker Automotive, suggesting that structural challenges were inherent in the program from its inception. Koplow and others argue for a re-evaluation of how government subsidies are structured and managed to ensure more effective and responsible use of public funds in supporting innovative but inherently risky ventures like Fisker Automotive.
The bankruptcy of Fisker Automotive serves as a cautionary tale about the complexities of government-backed innovation. While the dream of a thriving electric vehicle industry fueled by American ingenuity remains, the Fisker Automotive experience highlights the need for careful evaluation, robust oversight, and a realistic assessment of risks when public funds are used to drive technological advancements in the automotive sector and beyond.
