When one looks at the front grill of a Fisker Karma, the first model luxury electric car made by Fisker Automotive (see picture above), it seems to be laughing. It’s as if it were saying “ha, ha, I got your money!” Indeed it did as the company received a major part of its funding from the pockets of U.S. taxpayers. The automaker ceased production this past summer and has fired most of its staff. According to documents obtained by the Associated Press, the White House continued to play Sugar Daddy to Fisker even though it knew the company was in trouble.
In fact the Obama administration knew in back in 2010 that Fisker was not meeting the milestones set up for a half-billion dollar loan–way before they froze the loan because of questions regarding the company’s reporting.
An Energy Department official said in a June 2010 email that Fisker’s bid to draw on the federal loan may be jeopardized for failure to meet goals established by the department.
Despite that warning, Fisker continued to receive money until June 2011, when the DOE halted further funding. The agency did so after Fisker presented new information that called into question whether key milestones — including the launch of the company’s signature, $100,000 Karma hybrid — had been achieved, according to a credit report prepared by the Energy Department.
The December 2011 credit report said “DOE staff asked questions about the delays” in the launch of the Karma “and received varied and incomplete explanations,” leading to the suspension of the loan.
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Fisker had received a total of $192 million of the $529 million loan before it was suspended.
The Karma’s introduction was doomed from the start.
On March 7, 2012, a Fisker Karma purchased for US$107,850 by Consumer Reports magazine was taken out for a test drive at the 327-acre (1.32 km2) CR test track facility in Connecticut. The Karma had fewer than 200 miles (320 km) on its odometer. While performing a routine speedometer calibration check prior to actual road testing, the car broke down and could not be restarted. “We buy about 80 cars a year and this is the first time in memory that we have had a car that is undriveable before it has finished our check-in process.”
In August 2012 the Karma was recalled because of a faulty fan. And then there were the news reports that the car began to spontaneously ignite (something that tends to suppress demand).
In the June 2010 email, Sandra Claghorn, an official in the DOE’s loan program office, had written that Fisker “may be in limbo due to a lack of compliance with financial covenants” set up by the Energy Department to protect taxpayers in the event of default. Another document, from April 2010, listed milestones that Fisker had not yet met.
Aoife McCarthy, a spokeswoman for the Energy Department, said the June 2010 email was taken out of context.
“The document shows that one person at a meeting discussed the possibility that Fisker might not meet a financial commitment” required by the Energy Department, McCarthy said in an email late Tuesday. DOE received the needed certification five days later and subsequently made the loan payment, she said.
The lesson of Fisker is the same as that of Solyndra, government is lousy at picking winners
That is marketplace winners. In a capitalist system the marketplace is ruled by demand, when government tries to pick winners those decisions are political.
According to the University of Cal-Davis, there are four major kinds of electric and/or hybrid car buyers (and none of them fit into the profile of the luxury car buyer):
- Early Adopters: The folks who need to be the first on the block to own the latest technology.
- Uber-Greens: Members of the Church of Al Gore.
- Energy Security Hawks: They don’t want to give more money to the repressive oil-producing regimes.
- Cheap Bastards: They’ve calculated that even though electric cars cost more up front, they’ll more than make up the difference if they drive X miles a year for Y years, including assumptions about future gas and electric prices.
The luxury car buyer is looking for luxury and/or to show off (I have the nicest car on the block). Additionally the luxury car market skews older and upscale while the “green car” is more middle aged (18-49ish) and of average income.
In short, the market place was not yet ready for a luxury green car such as the Fisker Karma thus the company is failing after spending about $200 million of tax payer dollars.
As the saying goes “Karma’s a Bitch!,” especially the Fisker Karma as well as any other time the politicians try to pick marketplace winners.
Ed Morrissey has more on the story at Hot Air, plus (and don’t tell him I told you but) he’s got cookies.