Fisker's Federal Fiasco: Loans, 20-MPG Electric Cars, Shoddy Reporting Page 2

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2012 Fisker Karma

2012 Fisker Karma

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The remaining $360 million goes toward development of "Project Nina," a mid-size extended-range electric vehicle, to be built in a former GM plant in Wilmington, Delaware. That second vehicle is now being designed, but thus far no prototypes or even spy photos of it have emerged.

It will use a BMW-sourced four-cylinder turbocharged gasoline engine. Additional body styles, details of which Vice President Joe Biden blurted out two years ago, are planned to follow the Nina sedan into production.

(2) The Karma was always going to be built in Finland (and pricey)

It's been clear from early in Fisker's history that it would not assemble the Karma itself, but contract out the work. And Valmet in Finland is one of few surviving contract auto assemblers.

Some years ago, renowned auto-manufacturing expert James Harbour suggested that any production volume under 50,000 was not something a car company should undertake on its own--simply for capital expense reasons.

Well before it approved the Fisker loan, the DoE knew that the Karma was to be built in Finland--not Delaware. Fisker points out that the loan-funded final development work on the car has been done exclusively at its U.S. headquarters in Southern California.

Fisker's new Wilmington Plant (aerial view)

Fisker's new Wilmington Plant (aerial view)

The DoE also knew that the 2012 Fisker Karma would be a pricey product.

Over the four years of development, the price has risen to $95,900 from the 2008 price of $80,000, but it was never remotely going to compete with Toyotas and Chevrolets--even with the $39,995 Chevy Volt that's the only other range-extended electric car on the market beside the Karma.

(3) The DoE gave far larger loans to Ford and Nissan

Completely ignored in the Fisker coverage is the fact that it and Tesla are just two of the four automakers granted loans under the DoE's $25 billion Advanced-Technology Vehicle Manufacturing program.

In June 2009, the DoE granted loans to three carmakers: Ford ($5.9 billion), Nissan ($1.6 billion, though it only ended up borrowing $1.4 billion), and Tesla ($365 million).

Then, in September of that year, it granted a loan to one more automaker, Fisker Automotive. That company got $529 million for both final integration work on the Karma and design and development of the U.S.-built Project Nina lineup.

Only a small portion of Ford's total is going toward future hybrids and electric cars. The vast bulk of the $5.9 billion will fund making its EcoBoost turbocharged gasoline direct-injection engines at least optional across all of its volume vehicles by 2015.

Nissan is using its loans to adapt a Smyrna, Tennessee, plant to assemble Leaf electric cars and to build a lithium-ion cell fabrication plant next door.

GM withdrew its application to the DoE for $14.4 billion of loans in January, but Chrysler still hopes to receive loan approval of up $14 billion from the program.

Vice PresBiden At Ener1

Vice PresBiden At Ener1

But the Energy Department has turned down applicants too. Six months after the Fisker approval, It denied a $321.1 million loan application by the secretive V-Vehicle Corporation (VVC), which hoped to hire 1,400 workers to build a low-cost, composite-bodied car in Louisiana.

(4) These are loans, not grants

It's important for journalists to reiterate the phrase "low-interest loans" often, since some coverage has suggested the DoE funds are outright grants.

The reasonable comeback to that is that the loans are only promises to repay and, as Solyndra indicates, they may not get paid back. That's fair, certainly. But neither Fisker nor Tesla has filed for bankruptcy, and both are within a year of boosting their incoming cash flow as they begin to sell vehicles.

So what IS important?

After spending time critiquing other coverage, what do we think are the important parts of the story?

We'd like to see three specific questions answered.

  • Since Fisker backers have contributed to Democratic party causes, is there any hard evidence of improper influence over the DoE loan process by the White House?
  • How did Fisker come to select a closed assembly plant located in Vice President Joe Biden's home state, since Delaware is no longer an obvious place to build cars?
  • What steps does the DoE take to monitor compliance with the loan terms--and why won't it release the revised terms of the Fisker loans?

In the end, "expectations of transparency are different with taxpayer funding involved," said electric-car advocate Sexton. "So the DoE needs to step up too."

To us, the entire episode points to the complexity of government industrial and technological policy--and the inability among both media and the general public to acknowledge that most government decisions both involve risk and may be sideswiped by external events.

There will be, we're sure, more to come on this story.


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Comments (28)
  1. Very good point on the process of approving the loan.
    Also lobbying disclosure from 2009 show that Wellford Energy Advisors(Laura Lovelace)lobbied on Capitol Hill for Fisker to advance "the purchase of manufacturing facilities in Delaware."
    The real smoking gun will be FOIA'd documents from DoE showing that standard considerations were violated due to personal requests from political donors.

  2. As for the selection of the Delaware plant, it was my understanding that Fisker, being a designer of European luxury car, anticipated that North America and Europe were their most likely target markets, and the Delaware plant was very near a major European shipping port, and was a modern, operational plant just prior to GM's bankruptcy.

  3. Thanks for bringing out some good points. I thought all the $529M was for Nina, but now you are saying $169M was for the Karma.

    This is is really horrible. If the government is trying to support energy efficient vehicles, why loan $169M to a company that is making a 20MPG vehicle.

    Furthermore, given what we now know about the Karma's inefficient design, what makes anyone think the Nina will be fuel efficient. Clearly the leadership at Fisker doesn't give a rat's arse about efficiency and you can bet that will show in the Nina's MPG.

    This can be contrasted with Aptera that was built from the ground up with efficiency in mind, but didn't receive federal loans. So much for rewarding efficient design.

  4. I don't think Fisker, let alone the US government had any idea in advance that the Quantum Technologies powertrain would pan out so inefficient. You're right though to question the efficiency of the Nina which will be based on the same powertrain. Even if the terms of the loans don't require to meet any efficiency standards some major rethinking of the powertrain concept may be needed from a commercial viewpoint or Fisker will be the next Solyndra.

  5. John, your still wrong. Do yourself a favor an quit posting replies. $169mm went to the Headquarters in Irvine/Anaheim CA for the development of the Nina line up. The Karma was designed before the DOE loan. Did you know the EPA never took the car out to calculate the MPG? Also, if a commute is less than 32 miles, the car never turns on the gasoline engines? Also, the engines recharge the battery, so one can switch to stealth to sport intermittently throughout the drive. Get your intel right before posting a bunch of BS.

  6. Brian, Right from the story above "$169 million was allocated for engineering integration work on the Karma." So $169M for Karma. Either you didn't read the story or you disagree, not sure which.

    As for the EPA testing, we all know it has limitation, but all cars are subject to the same test that make them COMPARABLE which is key.

    Comparably, the Karma guzzles twice the electrons per mile as other EVs. Also at 20MPG (after 32 miles electric) it then guzzles gasoline at twice the rate of a modern fuel efficient car.

  7. how many dollars spent on the development of the Nina before the delay?

  8. And why does everyone act like 32 miles electric is a good thing? Electricity is not free for the taking like the nitrogen in the air. Electricity must be produced at significant expense and/or pollution. It matters how efficient the ev is.

  9. "And why does everyone act like 32 miles electric is a good thing?"

    Because electricity can be produced pollution-free. With a gas engine you have no choice but to pollute. This is a high-performance luxury car. The purchasers are not overly concerned about saving money on fuel. So it is a big deal that you can drive 32 miles pollution-free.

  10. "Pollution-free" is possible but unlikely. It would take something like a 7KW array on a house just to power this vehicle. That would cover the roof of even a large home of a Karma purchaser.

    Also, if a Karma owner does choose to put a 7KW array on their house, it probably will not cover their electricity usage, never mind an EV.

    So I am with you in spirit, EV+solar=good, but the numbers only work if the vehicle is efficient.

  11. John, unfortunately, Ampera was deemed less marketable, which is obvious when you put the Fisker Karma next to the Aptera 2e. I wish Aptera had been green lighted as well, because I believe the market is there for it.
    ABG revealed today that the Karma weighs 5,300 lbs, which explains why the 4 cylinder only gets 20 mpg. Hopefully, Fisker is following your advice and looking at much lighter weight materials for the Nina.
    The $169 million was spent domestically on local engineering and design and on local vendors like A123. The assembly contractor is foreign, but they were the right size and expertise to build this vehicle.

  12. Lighter weight, there is a thought...Except the Karma is mostly aluminum so what do you suggest?

  13. How does an aluminum sports sedan weigh 5300 lbs? Even if the battery is 1000 lbs, that is still a lot of weight for an aluminum car.

  14. Amused by your "Ampera" typo when you obviously meant "Aptera."

  15. Very good article. But, you've gotta do something about this font..

  16. @Mark: See if this helps ...

  17. For what it is worth, John's advice fixed the font for me.

  18. I think the problem with the Karma is it was designed to be good looking and not much else. Most of all the technical work was outsourced and not actually done by Fisker Automotive. I could be wrong but I think the Karma's performance would have been better if the company was started from an engineering stand point like Tesla, but it looks to me like it started with design. Fisker Automotive doesn't seem to be a complete car company, engineering needs to be the biggest part of your companies foundation followed up with a great design not the other way around. Still I'am a big fan of Henrik Fisker so I hope all will work out well for him and Fisker Automotive. I'm sure the lessons learned with the Karma will help the Nina.

  19. I can't think of how many people have said "What's the big deal, all you need to do is buy an electric motor, some batteries and throw them into the car." Well, this is what happens when you do that. GM and Tesla designed their own motors, they spent years evaluating batteries, Fisker made quick expedient decisions, and got this car to market years quicker than either the Volt or the Tesla Roadster.

  20. Solyndra failed not because of any "Chinese conspiracy" but because it was horribly configured - I remember before the loan an analyst claiming that the reason venture capitalists avoided that company was because they attempted to build panels that cost $6 per watt and sell them into a market for $3 per watt. When the govt backed the company AND made the ridiculous terms that the US govt would stand last in line in the event of a failure, many unsuspecting citizens assumed the Feds had guaranteed the investment. Regardless, the loan made zero fiscal sense - the company went bankrupt almost as soon as they got the taxpayer money. One cannot chalk this whole fiasco as "bad luck." It was riddled with corruption from the start- bribes, etc.

  21. @Ramon: Citations and links, please?

  22. The choice of that closed GM plant in Delaware was no accident - Joe (Foot-in-Mouth) Biden was right there pushing the loan thru. There is no Earthly reason for subsidizing any business, save one upon which the safety of the nation depends. Crony capitalism seems to be rife in this corrupt administration and the payoff here was to Biden's home state, and the UAW, which controls the Democratic Party and which Biden assumed would be brought in to man the assembly plant. No American industry has ever prospered
    thru govt subsidies. The mere fact that an industry "requires" subsidies tells you what the odds are of it succeeding. The fact that Ford, GM, etc got subsidies is no justification for giving subsidies to Fisker.

  23. @Ramon: Correction: As noted in the piece, GM did not get DoE low-interest loans, as Ford did. Ford, OTOH, did not get restructured with U.S. Government funds, as GM did. Conflating the two makes your entire argument look sloppy.

  24. I'd have to say that defending Fisker is a losing proposition. That company has not, I don't believe, ever told the truth about anything. They originally claimed their Karma would travel 60 miles on battery power and would do as well as the Volt running on extended range mode. They also claimed it would be as fast as it looks. Turns out the car is a slug unless one runs the gas engine to augment the battery pack. I'm sure their price quotes were also fraudulently optimistic. I find it a touching article of faith that some are claiming anything about their upcoming Nina, other than it likely being a poor rendition of the Volt, which today's news claims are piling up on dealer's lots, even with their very hefty $7500 taxpayer subsidy.

  25. This article was a great deal more informative than the Nightline report. Too bad far fewer will likely see it.

  26. Sadly last nights Nightline report was simply an attack on Obama that Fisker and Tesla got caught up in. They picked out a few facts but failed to give complete information, they failed to mention Fisker's Nina which was the main reason Fisker took the loan and picked on the Tesla Roadster which has nothing to do with Tesla's loan. They pointed out the high price of the cars, but as we all know new technologies cost allot at first. I'm sure both Tesla and Fisker had no idea that when they accepted the loans that they would get caught up in the presidential election wars. First Tesla and Fisker had to survive the stock market crash now they're going to have to fight they're way through the presidential cage match. Round 2....FIGHT!!

  27. Who cares if Fisker took out most of the loan for the Nina? If they fail badly on the Karma, the Nina is largely dead.

    Loan gone.

    Fisker is a slick company, unlike Tesla which is more like a geek company. Fisker is more like a Wall Street Company.

    Like Solyndra, the Fisker story does question the government's due diligence. There were plenty of warnings regarding Solyndra. CNBC cited an analyst report released before the loan that almost predicted a Solyndra bankruptcy to the date.

    Of course, other analysts might have made contrary predictions, but the gov's rush into the solyndra loan was a bad move.

    I don't know the whole Fisker story, but I doubt Fisker only picked Delaware because of a port, but because it was in Biden's home state

  28. I made no mention of who got more money. And Tesla is just as slick but may look geeky to people like you because they've done all of their own engineering work whereas Fisker outsourced nearly everything. If being more concerned with image makes your company look slick then Fisker has done that well. You shouldn't fall so deeply in love with the Karma's looks that you can't see straight.

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