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

By John Voelcker

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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.

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)

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

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.

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