What's The Best Place For Your Teen To Learn How...
News
Reviews
Guides
Gas Mileage
Car Types

DOE Loans Stifling Innovation Industry Wide?

 
1,863 views Dec 12, 2009

2011 Coda Sedan prototype - side

2011 Coda Sedan prototype - side

Enlarge Photo

How could loans from the federal government possibly be a bad thing for automakers?  According to special adviser for Coda Automotive Darryl Siry, whose words appeared in an article he wrote for Wired.com, loans from the US Department of Energy could be stifling innovation by reducing the amount of private capital investors.  The private capital investors have difficulty investing into a venture or company that has not received DOE support.

Darryl Siry previously held the position of chief marketing officer for Tesla Motors from 2006-2008.  According to Siry, a potential problem exists when the government decides to hand out large loans to select automakers.  Siry is referring to the $8 billion in loans handed out to Nissan, Ford, Tesla, and Fisker under the DOE AVTM program.  As Siry said, "This massive government intervention in private capital markets may have the unintended consequence of stifling innovation by reducing the flow of private capital into ventures that are not anointed by the DOE."

Siry's words ring true in many ways.  If the DOE decides to support an automaker, it must be a low risk situation.  The DOE has taken into account the risk versus reward for each investment it makes.  Private investors understand that the DOE is now careful with its loans.  If the government will invest into a company, private investors decide that it is likely a strong investment.  Many private investors are reluctant to put their money into smaller startups who were denied DOE funding.

Additionally, Siry adds, "Several sources within startup companies seeking DOE loans or grants have admitted that private fundraising is complicated by investor expectations of government support."  This quote appears to be most fitting for Aptera who has had difficulties raising capital in lieu of their initial rejection by the DOE.  Aptera has since reapplied for DOE funding under new guidelines.  As Siry speaks about Aptera from info from an undisclosed source close to the company he said, "All of the engineers are working on documentation for the DOE loan. Not on the vehicle itself. Another highly placed source at Aptera told Wired.com many potential investors wanted to see approval of the DOE loan before committing to invest."

The AVTM loans have been meet with criticism before.  Many feel it is unfair to fund only certain companies while ignoring others.  Others feel that government intervention is plain unfair in an open market system.  At least some companies believe the funding from the government limits outside funding from others.  It's unclear how the government can make satisfy everyone.

Darryl Siry is currently a special adviser to Coda Automotive.  Coda has not received loans from the DOE AVTM program nor have they applied for loans.

Source:  Edmunds, Wired.com





Posted in:
 
Contribute
Send us a tip Comment Contact the editor
Follow Us

 

Have an opinion?Join the conversation!

  • Posting indicates you have read this site's Privacy Policy and Terms of Use
  • Notify me when there are more comments
Comments (23)

  1. By Artemis Fact Posted: 12/12/2009 6:17am PST

    The existing system misallocates funding. They should offer investors a tax break for selected industry investments and let the investors decide which start-ups deserve funding. Untargeted support allows 'survival of the fittest' development and rewards the best ideaqs and approaches.
     
    Post Reply
    Vote
    Bad stuff?

  2. fb_637219902 avatar Darryl Siry Posted: 12/12/2009 8:02am PST

    Eric - thanks for the article but there is one important thing to note. I don't think it is accurate to say "according to a source at Coda Automotive." While I do advise them on various things, the opinions I write as a Wired.com contributor are my own independent opinions and not generally the opinions of my clients. I think it would be more accurate to say "according to Darryl Siry in an article on Wired.com"
     
    Post Reply
    Vote
    Bad stuff?

  3. By Jason M. Hendler Posted: 12/12/2009 8:45am PST

    Artemis, you are correct. I will always encourage the government to "incentivize" strategic investment by reducing / eliminating taxes on those investments - that is absolutely the best way. I think government investment is important now, because the capital markets completely dried up, so there was very little venture capital available, especially when the government's future policies are in flux. Now that the government has placed its bets, VC firms will continue to fund those companies already blessed by the government.
     
    Post Reply
    Vote
    Bad stuff?

  4. By Jason M. Hendler Posted: 12/12/2009 8:48am PST

    Darryl, under different circumstances, I would agree with you, but when the capital markets collapsed, it was essential for the government to provide capital, when / where it didn't exist before. Furthermore, it has forced the government to reveal its priorities by blessing some ventures and not others (without modifications). Nothing proves the governments future policies than direct investment.
     
    Post Reply
    Vote
    Bad stuff?

  5. By Author Posted: 12/12/2009 10:05am PST

    To Darryl, I made the correction as stated. But can not leave out the link between you and Coda as your association with the company may influence your opinion on this subject.
     
    Post Reply
    Vote
    Bad stuff?

  6. By Desertstraw Posted: 12/13/2009 8:21am PST

    I do not buy this argument at all. Most of the real innovations of the last century were done at government expense, from the internet to the basic science that has been the basis for new drugs and also DNA advances. Venture capitalists are useful but not prime movers.
    The government is not always right but we are all far better off because of its investment in technology.
     
    Post Reply
    Vote
    Bad stuff?

  7. By  eric E Posted: 12/13/2009 6:31pm PST

    I agree with Desertstraw. Venture capitalists are interested in one thing only...Money.
    True innovations and inventions typically require significant time and funding before they become feasible enough to attract private money.
    However, the government should not be run like a corporation, investing only in "low risk" ventures.
     
    Post Reply
    Vote
    Bad stuff?

  8. By Dr. Ibringdoh Posted: 12/14/2009 10:28am PST

    Eric L.:
    Excellent article.
    Posters #6 and #7: if you substantiate your claim that "real innovations of the last century were done at government expense," I'm sure the results would be informative and rewarding. While I will concede that government spending on defense-related projects has had an impact on innovation -- notably, the atomic bomb, and the transistor -- I'm curious as to how you will be able to specify how government funding supported the creation of the internet, basic science, new drugs, or DNA advances. In particular, what new drugs, science, or innovations in DNA technology do you believe arose through government funding?
    Respectfully,
    Dr. Ibringdoh
     
    Post Reply
    Vote
    Bad stuff?

  9. By Noel Park Posted: 12/14/2009 10:44am PST

    I agree with #6 & #7. Government may not always make the best choices, but it's a lot better than no investment at all. Plus, somebody has to nix investment in things like Aptera, which is doomed under its current management, IMHO. Or the Myers, or whatever it is, mentioned here today. Can anybody say "Corbin Sparrow"? It's enough of a risk to finance Tesla and Fisker, LOL.
     
    Post Reply
    Vote
    Bad stuff?

  10. By Desertstraw Posted: 12/14/2009 11:33am PST

    #8 First answer, from Wikipedia: The origins of the Internet reach back to the 1960s when the United States funded research projects of its military agencies to build robust, fault-tolerant and distributed computer networks. This research and a period of civilian funding of a new U.S. backbone by the National Science Foundation spawned worldwide participation in the development of new networking technologies and led to the commercialization of an international network in the mid 1990s, and resulted in the following popularization of countless applications in virtually every aspect of modern human life.
     
    Post Reply
    Vote
    Bad stuff?

  11. By Desertstraw Posted: 12/14/2009 11:45am PST

    #8 DNA: The project began in 1990, initially headed by James D. Watson at the U.S. National Institutes of Health. A working draft of the genome was released in 2000 and a complete one in 2003, with further analysis still being published. A parallel project was conducted outside of government by the Celera Corporation. Most of the government-sponsored sequencing was performed in universities and research centers from the United States, the United Kingdom, Canada, and New Zealand.
     
    Post Reply
    Vote
    Bad stuff?

  12. By Desertstraw Posted: 12/14/2009 12:02pm PST

    #8 Drug research: Much current medical research is publicly financed through the National Institutes of Health. For example, a great deal of basic drug research, for example, is funded by the government. Drug companies are invited in for the later stages of “product development,” the formulation and marketing of new drugs. AZT for HIV patients is one example. The early, expensive research was conducted with government money. After the drug was found to be effective, marketing rights went to the drug company.
     
    Post Reply
    Vote
    Bad stuff?

  13. By  eric E Posted: 12/14/2009 5:48pm PST

    For Coda, their number one priority needs to be restyling the front of that car. I believe they have a chance with their business concept but the product is the face of their company and... well... it's kinda ugly.
     
    Post Reply
    Vote
    Bad stuff?

  14. By DC Posted: 12/14/2009 11:57pm PST

    It is also possible, that these DoE loans have a stiffling effect, not necessarily because it is a subsidy per se, but rather, that *most* of the complanies(not all) but most, have no real interest in actually produceing EVs?. GM is a perfect example, it took billions to work on worthless H2 FCV vehicles, knowing full well, they will never be practical by any measure. Ford, same idea, talks a lot, does endless "research" with the funds given, yet like 99% of in the industry, does not actually produce any actual well...alternate fuel vehicles. Perhaps another problem is that the US gov't is at a basic level, fairly lax about demanding actual results when it hands out large amounts of money to corporations. After all, one would think that one minor stipulation of such ...handouts would be to actually produce something with the money, besides the occasional press release saying at some vague, ill-defined point in the distant future, you might actually build a vehicle people can buy. Wouldnt you?
     
    Post Reply
    Vote
    Bad stuff?

  15. By Desertstraw Posted: 12/15/2009 3:17am PST

    I am dating myself but my graduate research over half a century ago was financed by a Navy Department grant. In those days the Navy Department had a lot of money and just gave away loads of these grants without much regard to the value of the project. Although my own research was insignificant, other recipients of these grants made major contributions to science. The overall result was that Navy grants were money well spent. My guess is that DoE grants will work the same way.
     
    Post Reply
    Vote
    Bad stuff?

  16. By Dr. Ibringdoh Posted: 12/15/2009 5:18am PST

    Noel Park #9:
    "Government may not always make the best choices, but it's a lot better than no investment at all."
    Your thesis that without government, there would be no investment, is fascinating - but fatally flawed. Moreover, it illustrates a profound ignorance of history: Is government investment responsible for the invention of the auto industry in the early 1900s? Is government investment responsible for the proliferation of steel and railroad industries in the 1800s? Is government investment responsible for Gutenberg's invention of the printing press in 1430's? Or how about the electric light bulb that many of us still use today?
    Another point that you might want to consider, Mr. Park, is that government investment choices are (in large part) politically motivated, whereas investment choices made in the private sector are of necessity (in large part) technically motivated.
    Respectfully,
    Dr. Ibringdoh
     
    Post Reply
    Vote
    Bad stuff?

  17. By Dr. Ibringdoh Posted: 12/15/2009 5:26am PST

    Desertstraw #10:
    I will readily agree (as I have previously indicated) that some the ideas and bases for the of internet arose from defense-related research. However, you quote selectively from Wikipedia, and in doing so, commit a serious Fallacy of Exclusion:
    "After much work, the first two nodes of what would become the ARPANET were interconnected between UCLA's School of Engineering and Applied Science and SRI International (SRI) in Menlo Park, California, on October 29, 1969. The ARPANET was one of the "eve" networks of today's Internet. Following on from the demonstration that packet switching worked on the ARPANET, the British Post Office, Telenet, DATAPAC and TRANSPAC collaborated to create the first international packet-switched network service. In the UK, this was referred to as the International Packet Switched Service (IPSS), in 1978. The collection of X.25-based networks grew from Europe and the US to cover Canada, Hong Kong and Australia by 1981. The X.25 packet switching standard was developed in the CCITT (now called ITU-T) around 1976."
    In other words, the address packet used for the proliferation of the internet was developed in large part by a collection of private and public research organizations working in tandem. The role of government funding in this development is at best small or negligible.
    I'll address your other posts later.
    Respectfully,
    Dr. Ibringdoh
     
    Post Reply
    Vote
    Bad stuff?

  18. By Jason M. Hendler Posted: 12/15/2009 6:10am PST

    Hmmmm, this thread sounds a lot like one poster having a strawman discussion with himself.
    DC - given Shell's current rollout of hydrogen stations in NY and Toyota, Honda, Daimler and GM rolling out their hydrogen vehicles, fuel cells are no myth.
     
    Post Reply
    Vote
    Bad stuff?

  19. By Tim Posted: 12/15/2009 6:36am PST

    Corporatism is a form of STATISM (along with Socialism and Fascism) which grows govt & rewards failure while it punishes success by redistributing from the productive to buy favor from the non-productive in this case the U.A.W.
    Statism (Keynesian central planning) KILLS Free Market competition and the risk-reward economic model which has produced ALL human advances.
    Statism has bankrupted all nations that suffered it and has now snuffing out the shining light of liberty that once drew the whole world to Americas shores.
    Read Hamiltons Curse!
     
    Post Reply
    Vote
    Bad stuff?

  20. By Desertstraw Posted: 12/15/2009 7:55am PST

    #17 Your own argument:"The ARPANET (Advanced Research Projects Agency Network) created by ARPA of the United States Department of Defense during the Cold War, was the world's first operational packet switching network, and the predecessor of the global Internet."
    As for your citation of railroads, you cannot be an American."Between 1850 and 1872 extensive cessions of public lands were made to states and to railroad companies to promote railroad construction.18 Usually the companies received from the federal government, in twenty- or fifty-mile strips, alternate sections of public land for each mile of track that was built."
    Nobody ever said that every invention in history came from government sponsorship.
     
    Post Reply
    Vote
    Bad stuff?

  21. By  Government Grants Posted: 1/12/2010 8:52am PST

    I agree! We should appreciate such steps of government.
     
    Post Reply
    Vote
    Bad stuff?

  22. By  goverment loan Posted: 1/13/2010 7:20am PST

    I agree…receiving a government grant is a lot harder than most people think. If you are need of immediate funds for your business, then I don’t think applying for a government grant will benefit you much. For this you must have a business plan for grants. This plan should include specific information about the project, a detailed plan for how the funds will be used and as much information about the plan as possible
     
    Post Reply
    Vote
    Bad stuff?

  23. By davidbaer Posted: 1/28/2010 2:25am PST

    Often we forget the little guy, the SMB, in our discussions of the comings and goings of the Internet marketing industry. Sure there are times like this when a report surfaces talking about their issues and concerns but, for the most part, we like to talk about big brands and how they do the Internet marketing thing well or not so well.
    www.onlineuniversalwork.com
     
    Post Reply
    Vote
    Bad stuff?

 

Have an opinion?Join the conversation!

Find Green Cars

Go!


More from High Gear Media

 
 
Green Car Reports
  • Follow Us
  • Twiiter
  • Facebook
 
 
© 2011 Green Car Reports. All Rights Reserved. Green Car Reports is published by High Gear Media. Send us feedback. Stock photography by Homestar, LLC.