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.
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 criticised 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.
At an April Congressional hearing titled “Green Energy Oversight: Examining the Department of Energy’s Bad Bet on Fisker Automotive,” Rep. Jim Jordan (R) of Ohio called the DOE loan program “one of the most disastrously mismanaged and corrupt programs in U.S. history.”
Walsh is clearly annoyed by comparisons of VPG with the electric automaker.
“Fisker is an electric sports car,” he said. “Who needs an electric sports car, other than Justin Bieber?”
“There is a need for what we build, and not a need for an electric sports car,” he added.
The Lost Promise Of VPG Autos
Most vehicles for wheelchair users are conversion vans: regular vans retrofitted to accommodate disabled users. In contrast, VPG’s MV-1 is designed from the ground up to be a mobility van, which makes it more durable, reliable, and cheaper, Walsh said.
All VPG needed was an extension until April to get production going again and start delivering cars it had taken orders for, said Walsh, adding that paying back the DOE “wasn’t going to be a problem.”
In an email to Business Insider, a DOE spokesperson defended the track record of the ATVM loan program:
Our losses are on track to be a small fraction of the loan loss reserve Congress established to cover expected losses, and we are helping valuable new technologies gain a toehold so that America can win the global race for clean energy jobs.
While he believes the DOE was overcautious in handling VPG’s loan, Walsh said he did not regret accepting the federal funds.
“I don’t think you should ever sit back and regret anyone that’s giving you assistance,” he said. “It was an excellent investment. It just needed a little bit more time.”
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