VPG MV-1Enlarge Photo
The ex-CEO of a now-defunct automaker that received a federal loan said his company would still be in business if the government were not afraid of backlash like that following the failure of electric automaker Fisker.
The automaker, Vehicle Production Group (aka VPG Autos), produced the MV-1, a six-passenger, wheelchair-accessible van than can run on gasoline or environmentally-friendly compressed natural gas.
It raised $400 million in private equity, and received $50 million under the Department of Energy's Advanced Technologies Vehicles Manufacturing Loan Program (ATVM) — the same program that gave loans to Fisker, Tesla, Ford, and Nissan.
Under the terms of its loan, VPG was required to keep a certain amount of cash on hand. When it fell below that level, the DOE froze its assets on February 29. VPG was forced to cease operations, and laid off all but three of its 100 employees, including former CEO John Walsh.
Walsh, who served as CEO from March 2012 to February 2013, told Business Insider that his company was healthy, having already delivered 2,500 vans and secured orders for thousands more.
But the company ran into cash flow problems after it temporarily halted production to retool for a new model that would allow wheelchair users to drive themselves.
VPG had sold the cars in its inventory, and with its source of revenue gone, it needed about $50 million to restart production. VPG had already drawn down the full $50 million from the DOE, and was not looking for more federal assistance, Walsh said.
The company was in talks with multiple private investors to secure that money — but had trouble "ironing out terms," according to Walsh, when its cash reserves dropped below the allowed level and the DOE stepped in, effectively shutting everything down.
"It Has Everything To Do With Fisker"
Walsh knew VPG's cash reserves were low, and he had hoped for an extension from the DOE. It was not an unreasonable expectation: Fisker obtained an extra $32 million in government funds after missing a production target, according to the AP.
MV-1 Wheelchair-Accessible Mobility VehicleEnlarge Photo
But after problems began with Fisker, which eventually had its loan frozen and may be headed for bankruptcy, the DOE tightened the rules for awarding loans under the ATVM program, the Detroit News reported.
Walsh believes the department was also overcautious in applying the rules of the loan it gave VPG, at the cost of the company.
"I think the DOE has made a major error with this company because of the pressures of the Fisker situation, and that is unfortunate," he said. "It has everything to do with Fisker."
The DOE and the Obama administration have been heavily criticized by Republicans over the Fisker failure, and for giving more money to a company already in trouble. Fisker received $192 million of the $500 million it was offered under its loan.