* Maker of Karma hybrid verges on collapse
* At issue is $529 mln loan California carmaker received in
* DOE loan helped spur private investment in Fisker
* Republican says govt is a poor venture capitalist
By Ayesha Rascoe and Deepa Seetharaman
April 24 Taxpayer-backed funds kept flowing to
electric carmaker Fisker Automotive months after the company
failed to meet key production benchmarks, lawmakers said at a
congressional hearing on Wednesday.
Republican lawmakers on the House Oversight Committee cited
Department of Energy documents as showing Fisker got $32 million
in payments, even after it failed to launch its Karma vehicle in
February of 2011.
They spent hours quizzing current and former Fisker
executives and an Energy Department official over what the
lawmakers termed the government's "bad bet" on the fledgling
luxury car-maker, and questioned whether the company received
special treatment that put taxpayer dollars at risk.
The committee hearing focused on the DOE's decision in 2009
to grant the company a $529 million loan only to see it veer
toward bankruptcy - a chain of events with echoes of Solyndra,
the government-backed solar manufacturer that went out of
business in 2011.
"The government is a very poor venture capitalist," said
Patrick McHenry, a Republican from North Carolina.
Fisker's troubles are the latest in a string of green
automotive technology flops, including last year's bankruptcy of
its lithium-ion battery supplier, A123 Systems. Forecasts in
2009 for sales of hybrid and electric vehicles far outstripped
Henrik Fisker, founder and former CEO, said the company,
which has not built a vehicle since July, can still bounce back
and repay nearly $200 million in government loans if is able to
find the right "financial and strategic resources."
Testifying about his eponymous company, the Danish-born
Fisker, who was forced to resign as chairman in March, blamed
problems with its parts suppliers, delays in regulatory approval
and recalls of its flagship Karma plug-in hybrid sports car for
the company's struggles.
The automaker verges on collapse. Among the questions still
outstanding is whether Fisker's prospects were ever strong
enough to warrant the DOE's backing, which helped trigger a
flood of private financing for Fisker.
"After resolving initial launch challenges, the cars perform
well and customers love them," Fisker asserted.
Fisker's failure to make a payment on the DOE loan on Monday
was the latest of its troubles. In recent weeks, Fisker has
fired 75 percent of its workforce and hired bankruptcy advisers.
"The Obama Administration owes the American taxpayer an
explanation as to why this bad loan was made in the first place,
and what they are going to do to minimize the loss that
taxpayers face," said Ohio Republican Jim Jordan, chairman of
the subcommittee holding Wednesday's hearing.
DOE BACKING BOOSTED FISKER
The DOE's early backing helped put Fisker, and its
$100,000-plus Karma plug-in hybrid sports car, on the map. With
government backing in hand, Fisker has gone on to raise $1.2
billion in private funds to date, according to SEC filings.
The 2009 loan signaled that the DOE had done a rigorous
review of the project, said Salo Zelermyer, a senior counsel at
the DOE under the Bush administration, who also helped create
the auto loan program. The loan program was funded in late 2008.
"It's fair to say the projects the DOE chose to proceed with
were clearly given an added credibility with folks on the
outside," said Zelermyer, now a senior counsel at Bracewell and
Giuliani in Washington.
Fisker tapped $192 million of its $529 million before the
DOE quietly decided to freeze Fisker's credit line in June 2011.
Neither the DOE nor Fisker publicly disclosed that decision
until early 2012. Lawyers and a DOE official said the department
was not obligated to divulge the decision.
In the confidential "information statement" sent to
shareholders in December 2011 and obtained by Reuters, Fisker
said it "will not meet certain financial covenants and project
milestones" required in the DOE agreement, including earnings,
net worth and certain financial ratio targets.
Lawmakers raised questions about the relationship between
the DOE and Fisker, which has been strained in recent months,
people familiar with the matter have said.
Republicans said Fisker received loans despite its junk bond
rating and unproven track record.
The terms of Fisker's pact with the DOE were enough to put
off potential suitors, including Chinese automaker Geely
Automobile Holdings Ltd. The conditions included an
obligation to restore capacity and jobs at the company's
Delaware plant according to a schedule imposed by the U.S.
Energy Department officials defended the auto loan program,
saying it helped to bring the industry from the brink of
collapse during a severe economic downturn. Mainstream carmakers
like GM and Chrysler were key beneficiaries, and their revival
has been widely acclaimed.
Nicholas Whitcombe, former head of the auto loan program,
said the DOE remains open to providing additional aid to the
Since the high profile failure of Solyndra, a topic brought
up regularly by Republicans during President Barack Obama's 2012
re-election campaign, the Obama administration has become far
more risk averse when doling out loan payments.
Solyndra, the first loan recipient and first major failure
for the department's portfolio, received more than $527 million
of its $535 million loan before filing for bankruptcy.