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VPG Shuts Down; Startup Van Maker Was Backed By DoE Loans

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While Tesla Motors [NSDQ:TSLA] is on a roll--with a rave review from Consumer Reports and a profitable quarter--other startup automakers aren't faring so well.

And now another small car company that received low-interest loans from the U.S. Department of Energy is in trouble and has halted operations.

The Vehicle Production Group, or VPG, built a six-passenger MV-1 handicapped-accessible minivan that ran on gasoline or natural gas.

Between September 2011 and last October, VPG built about 2,500 cars--more than either Tesla Motors or Fisker Automotive built over the same period.

About 75 percent of those cars used a 4.6-liter gasoline V-8 engine; the rest were fueled on natural gas.

The company had hoped to build about 6,000 cars this year; MV-1s can be seen on the streets of New York City and elsewhere, usually serving as handicapped transport.

$50 million DoE loan

VPG received the last loan approval granted under the DoE's ATVM loan program, for $50 million in February 2011.

The loan was expected to help the company build production to 22,000 vehicles, according to the DoE, and create 900 new jobs.

The company halted production late last year; it shut down in April because it couldn't make its payroll, according to former CEO John Walsh in a Bloomberg interview.

VPG had drawn down its entire loan amount, Walsh said, but made no repayments.

He also told Bloomberg that the Department of Energy had seized $5 million in a company reserve account.

VPG has not filed for bankruptcy, and Walsh claimed that two companies are interested in VPG's assets.

 

MV-1 Wheelchair-Accessible Mobility Vehicle

MV-1 Wheelchair-Accessible Mobility Vehicle

Enlarge Photo

Ford, Nissan get lion's share

Other car companies that received DoE loans are Fisker, Ford, Nissan, and Tesla.

Together, Ford and Nissan have received $7.3 billion of the $8.4 billion loaned under the program, which has not authorized any new loan commitments in more than two years.

Ford, Nissan, and Tesla are thus far paying back their loans on schedule or planning to--none of those companies will comment in detail on its payments--and startup Tesla has said it will pay off its loans ahead of schedule.

Fisker Automotive, on the other hand, is in dire straits.

The company had its loans frozen for missing deadlines, halted production of its Karma luxury range-extended electric car last summer, laid off most employees last month, and has not been able to find a financial savior.

2012 Fisker Karma in Costco parking lot, Santa Monica, California [photo: Chris Williams]

2012 Fisker Karma in Costco parking lot, Santa Monica, California [photo: Chris Williams]

Enlarge Photo

Romney's "loser" companies

As Bloomberg notes, "If both Fisker and VPG default on the entire amounts they’ve received, the $217 million lost would be less than the $10 billion reserve Congress built into the program and about 3 percent of the amount lent."

The DoE low-interest loan program to encourage production of advanced-technology vehicle manufacturing has been widely slammed by a variety of politicians, generally Republicans.

Fisker and Tesla were cited as "losers" by Mitt Romney, the unsuccessful Republican candidate for president, during last fall's presidential debates.

Bloomberg notes that Sen. Jeff Flake [R-AZ] had pledged to intensify efforts to shut down the DoE loan program.

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Comments (5)
  1. I believe the Senator from Arizona is wasting his time, or just doing a little political grandstanding. The ATVM program had $25 billion available of which they lent out a little over $8B. If they intended to lend out the rest they likely would have done it by now. The ATVM was a response to the lack of capital in the marketplace by the Bush administration. It is likely unneeded now that there is adequate private equity available. So, it appears the Senator will shut down what is unlikely to be used anyway.
     
    Post Reply
    +1
    Bad stuff?

  2. The loans were low interest if I recall. So, if Ford, Nissan & Tesla remain on track to repay P&I, then overall the losses are not even noticeable losses overall in the grand scheme of things. In one year alone at 1%, 7.3 billion would take care of 1/3 of the total amount of bad debts. Good luck on finding a business that doesn't write off 2 - 3% or more to bad debts.
     
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    +2
    Bad stuff?

     
  3. I expect the military (or other government branches') spending that ends up not being productively used is far, far beyond 3%. It seems to me that on the whole the ATVM program has been a net success: the manufacturers who are paying back their loans have advanced the industry much more than any of the failures have held it back.
     
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    Bad stuff?

  4. I admit I may be overly optimistic but I think the loan will eventually be repaid. The MV-1 is a great product. They sold over 2,500 vehicles and have 2,300 currently on back order. The alternative to the MV-1 is to buy a van and have a $20,000 to $25,000 retrofit performed that destroys the structural integrity of the van. The resulting solution is no where near the quality and durability of the MV-1 and is $15,000 to $20,000 more expensive. Some company will buy them. I'm handicapped and need a power wheelchair. I plan to buy one next year.
     
    Post Reply
    +2
    Bad stuff?

  5. I saw one of these about a month ago, and I wondered what it was. It is fugly in person, that's for sure.

    What is the logic that says loans can only go to projects that will succeed? If we had that attitude, then nothing new would ever happen.

    Neil
     
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