Money and Democracy

Published — October 25, 2011 Updated — May 19, 2014 at 12:19 pm ET

Republicans call for probe of Obama’s green car program

Henrik Fisker, CEO of Fisker Automotive, listens as Vice President Joe Biden makes an announcement about the company's plan for electric vehicles. Rob Carr/AP

Romney accuses White House of cronyism; Others criticize use of tax dollars for overseas car-making


Republicans are calling on Congressional investigators to expand their probe of the Obama Administration’s “green energy” loan program to include Fisker, the start-up electric car company that received more than $500 million in federal support but is assembling its high-end sports sedan in Finland.

“We need to extend the investigation,” Rep. Tim Murphy, a Pennsylvania Republican who sits on the committee that has been investigating the government’s loan program, told ABC News in an interview for “World News” and “Nightline”. “If they couldn’t find someone to build the car in the U.S., then don’t do it. Find another way. Find something else.”

Fisker is one of two start-up electric car companies that combined have been offered $1 billion in federal loans through an Energy Department program meant to create jobs and improve air quality through the fledgling alternative energy industry. The loan program has faced intense scrutiny from Congress since the first loan recipient, the solar manufacturing firm Solyndra, declared bankruptcy last month.

A House Energy and Commerce Committee panel has held a series of hearings and released thousands of pages of documents subpoenaed from the Obama administration that showed there were deep divisions about the wisdom of loaning Solyndra $535 million. ABC News reported Thursday that there are now emerging questions about the progress of Fisker Automotive, which has experienced delays with the production of its $97,000 hybrid electric sports sedan. The company has yet to make public even a picture of its next car — a more affordable family car that is supposed to be manufactured in Delaware.

Fisker received its government loan even after company executives told Energy Department officials that they had hired a company in Finland to assemble their first car, the Karma. Administration officials said they approved the deal on the condition that none of the government loan money would be spent on overseas assembly. They also noted the promise of the second line of cars, which they predict will eventually create thousands of jobs at a shuttered GM plant in Delaware.

“Not a single dollar of the [Department of Energy] DoE loans has been, or will be, spent outside of America,” a statement from Fisker spokesman Roger Ormisher said. “All expenditures are reviewed by [PriceWaterhouseCoopers] on behalf of the DoE.”

“After receiving the DoE loan,” said the statement, “Fisker made it a priority to create U.S. jobs, which led to the purchase [of] its own assembly plant in Delaware where we plan to establish production of our second, higher volume, line of vehicles.” Fisker officials said that the company has already hired hundreds of workers in the U.S., most in engineering and marketing jobs, though about 100 assembly line workers have been hired to start prepping the Delaware facility.

Press Secretary Jay Carney told ABC News White House Correspondent Jake Tapper Friday that the funds provided to Fisker “are not being used, as I believe the CEO said to ABC, are not being used for its facility in Finland.”

Murphy said the Energy Department’s position amounted to “splitting hairs.”

“Ultimately, American taxpayer dollars went to a Finnish automaker to build high-end luxury automobiles for Hollywood,” he said.

Concerns about the fate of federal loans to companies such as Solyndra and Fisker have become grist for campaign trail attacks aimed at President Obama. Former Massachusetts Gov. Mitt Romney joined those calling on more scrutiny from Congress.

“The U.S. government shouldn’t be playing venture capitalist,” Romney wrote in an op-ed first published in the Orange County-Register. “It’s not merely that government bureaucrats are bad at picking winners. The very process invites cronyism and outright corruption.”

Tesla Also Benefitted From Green Energy Loan

ABC News got an early look at both the Fisker Karma, the first 40 of which were delivered to dealers last week, and of the new family sedan being built by a rival start-up company, Tesla, which also benefitted from a green energy loan.

Silicon Valley-based Tesla plans to build 20,000 vehicles a year at a massive shuttered auto plant it bought in California, which is now being prepared for production to start next year. The company was co-founded by internet billionaire Elon Musk, who told Nightline two years ago he was driven by concerns about global warming.

“I think socially it is very much the right time,” he said.

Tesla has already been selling its high-priced Roadster to a niche market that includes George Clooney and Arnold Schwarzenegger. But company executives told ABC News that its future depends on the success of the family sedan, called the Model S, which was only recently unveiled to the public. Priced at around $57,000, it is styled to compete with luxury mid-sized cars including BMW and Mercedes.

“We’re developing a higher volume model, which is going to allow us to build that vehicle at less than half the cost of our first,” said Diarmuid O’Connell, Tesla’s vice president of corporate and business development. He says the company will use the smarts of American high tech wizards to revolutionize the way cars are made, building its new sedan from the ground up.

But some industry analysts, including Alexander Taylor, the auto columnist at Fortune magazine, said that Tesla has put itself at risk by trying to reinvent the way cars are assembled by eliminating outsourcing of components.

“This is a huge learning curve, even for an established company like GM or Ford,” Taylor said. “For a startup company like Tesla, it’s almost impossible to do it right the first time around.”

Tesla’s O’Connell disputes that, calling his company a “disruptive” force in the auto industry, compelling it to pursue electric technology. He said that, even though it has yet to make any profit, the company is meeting expectations and its government loan is not in jeopardy.

“We have a strong track record,” he said. “We’ve attracted private investors. We’re a public company whose records and performance can be judged by anybody.”

However, Tesla has yet to see a profitable quarter, and its own government filings laying out the risks faced by investors acknowledge that a lot could still go wrong. “We have a history of losses and we expect significant increases in our costs and expenses to result in continuing losses for at least the foreseeable future,” the company’s June filing with the Securities and Exchange Commission says.

In an interview on ABC’s Nightline, O’Connell is asked how the company will repay the loan if it doesn’t make a profit.

“We will make a profit. That’s the plan, and we’re executing it,” he said.

The Energy Department has said that projects like those of Fisker and Tesla are risky by their nature, but that the taxpayer backed financing will ultimately pay off.

Yet the Government Accountability Office, the investigative arm of Congress, has already raised questions about the Energy Department’s oversight of the $25 billion Advanced Technology Vehicles Manufacturing loan program.

An audit this year by the GAO criticized the Energy Department for not keeping close enough tabs on its fleet of auto loans — including those to Fisker and Tesla — to ensure they meet benchmarks. “DOE cannot be assured that the projects are on track to deliver the vehicles as agreed,” said the GAO report examining the department’s ATVM program. “It also means that U.S. taxpayers do not know whether they are getting what they paid for through the loans.”

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