The critics have come out to question the validity of last week’s DOE decision to loan $528 million to plug-in startup Fisker. There’s valid criticism to be made of the decision, then there’s the kind that’s being thrown around.
Let’s start with the former. Fisker Automotive makes one product, a plug-in electric hybrid that will cost $87,900. That car was just driven before the press for the first time two months ago. It will be on the road next summer. That’s the sum total of the company’s accomplishments.
It says it can build a cheaper car. It says it can be profitable. It says a lot of things. Until it delivers, we should be sceptical. That’s a legit criticism.
Another legit criticism we’ve heard: The government should be getting more out of these loans. If we’re going to lend billions to help bring these companies to market we should get more than just our money back plus a little interest. We should look for a nicer return on the investment.
The not so legit criticism comes from the Journal who last week tried very weakly to connect the dots between Al Gore’s investment in Fisker, and its ability to get money from the government. The insinuation is that its some sort of sweetheart deal for Gore. It’s easy to try and stir up a storm about Al Gore’s business interests and his environmentalism, he’s someone people love to hate.
In this case it doesn’t make sense. Even with Al Gore on board, do we think Fisker has had even 1/10 of the government interaction that Ford, GM or Chrysler have had in the past year? GM is a government owned company, after all. Fisker lobbied the government, but so does everyone else. Gore’s backing probably helped, but he wasn’t exactly a key figure.
Incidentally, if the DOE announces a loan for Coda, the electric company that Hank Paulson invested in, we hope the Journal runs a story questioning those ties. The fact is all these startups are now lobbying the government. That’s what happens when the government becomes a big lender. Also, keep in mind, this program was conceived under George Bush’s watch. So, it’s not like this is a new partisan creation.
Another tepid dose of criticism comes from David Welch at BusinessWeek, who says the government should be giving the money to the more experienced automakers. The experienced automakers ran their businesses into a ditch, only to get bailed out with billions of dollars from the US. Why advocate for them to get even more money?
Giving smaller companies the money makes more sense. When Bob Lutz, GM’s car god, saw the Tesla Roadster it inspired him to start building the Chevy Volt. Without a smaller company to kick the big guys in the butt, we’d be stagnant. However, car building isn’t cheap. It’s capital intesive, so these loans are necessary to kick the development into overdrive.
Fisker or Tesla could slowly build their manufacturing capacity, but it’s a priority to the government to see fewer gas powered cars on the road. With a spike in oil looming, and all the negatives that come with it, that makes sense.
Further, pouring money into the smaller electric startups makes sense because they will attack the problem with single minded devotion that GM just won’t. As much as GM likes to talk about the Volt, the car is not a make-or-break product. For Fisker and Tesla, their electric cars are all they have. They have to get it right or else.
Maybe they’ll get it wrong. At least we’ll have only blown a billion dollars on the two companies, as opposed to the big boys, who are hoovering up tens of billions. But, if it makes critics feel better, we are giving more money to big automakers through the program. We’ve already given over $5 billion to Nissan and Ford. And since GM is a government owned company, it’s very likely it will get more money as well.
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