WASHINGTON (Reuters) - In the weeks leading up to a visit by President Barack Obama to Solyndra on May 25, 2010, the California solar-panel maker was in crisis.
Prices for solar panels were in free-fall and the company’s chief executive officer was bickering with customers unhappy with the amount of electricity produced by the cylindrical panels he invented, according to new e-mails released by Republicans investigating the now-bankrupt company.
An initial public offering was on the skids, and finally, there was a “mutiny” by the company’s entire executive team, who flagged the crisis to the company’s board of directors.
The e-mails between senior advisers to George Kaiser, a major investor in the company, provide the best view yet into how problems took root early at Solyndra.
The company had received a $535 million federal loan guarantee in 2009 and was held up by the Obama administration as an example of how it could help create green jobs.
Behind the scenes, Kaiser’s Argonaut Private Equity was trying to right the flailing company. “To put it bluntly our poster child of private equity is acting up something fierce,” a senior official from the George Kaiser Family Foundation said in an internal e-mail dated May 8, 2010, warning Solyndra’s long-term business plan was in jeopardy.
The new emails highlight how the government backed a company that was in trouble from its early stages, giving more fuel to critics who believe the government threw good taxpayer money after bad.
Energy Secretary Steven Chu’s top adviser on stimulus projects brushed aside White House questions about financial red flags ahead of Obama’s May 25 visit.
The investment has become politically embarrassing for the administration in the 2012 presidential election race. Last month, Republicans grilled Chu about why he approved the restructuring plan, which kept the company going after it ran out of cash in late 2010.
Chu has staunchly defended his department’s decisions as trying to get the best return for taxpayers. The department’s inspector general, an independent watchdog, is probing the loan, with help from the FBI. The House Energy and Commerce Committee has been investigating the loan since February, collecting more than 250,000 pages of documents from government departments, the White House and private investors.
The White House and Energy Department did not immediately comment on the emails.
Solyndra got the loan in 2009, the first company to receive funding under a program that was a top priority for the newly minted administration. Between November 2009 and February 2010, it became clear that subsidized Chinese solar panel manufacturers were undercutting higher-cost Solyndra, the e-mails from private investors said.
By April, Solyndra’s Chief Executive Chris Gronet had “burned a lot of bridges” with customers, said Steven Mitchell, managing partner with Argonaut Private Equity, in an internal e-mail. “Gronet was unwilling to accept that the market was forcing a lower price — he reacted unilaterally by forcing his sales people to maintain high pricing in spite of customers’ pleas to ‘help them out,’” Mitchell wrote.
At the same time, existing customers were “disgruntled” because panels they had bought from Solyndra were not producing as much electricity as promised. “Unfortunately, Gronet again took a unilateral stance and over the objections of his sales and marketing folks to argue with customers over their data set or power readings — Gronet clearly never learned the ‘customer is always right’ slogan,” wrote Mitchell, who had a seat on the company’s board of directors.
That was the last straw before his executive team demanded a “derating” in the panels by 3.5 percent, another move that hurt the company’s revenues.
“It took a full mutiny by management to bring this to the board’s attention,” Mitchell said.
Gronet’s lawyer could not immediately comment about the emails on Thursday.
Argonaut first told the Energy Department about Solyndra’s revenue problems between April and May 2010, Mitchell said in a November 2010 e-mail to Kaiser, a billionaire oilman and fund-raiser to Obama during last election.
After the initial public offering was withdrawn from the market in June, Solyndra hired a new CEO, Brian Harrison, and Gronet became the chairman of the board. It would have looked bad to fire Gronet, the founder, who had a good relationship with the Energy Department and was the face of the company in Washington, where the company wanted to focus more of its sales efforts, the Argonaut e-mails said.
“He has star power in DC and we need our government to step up if at all possible,” one e-mail said. The company was counting on a second loan guarantee from the Energy Department for $469 million, but ultimately it was not approved.
By June, Solyndra was working with a Washington lobbying firm on a strategy to get government contracts with “Buy America” procurement rules that would give its panels an advantage, the e-mails showed. “Getting business from Uncle Sam is a principal element of Solyndra’s channel strategy,” an unidentified official said in an August 10 e-mail provided to Republican investigators by Argonaut.
Gronet stayed on as chairman through to August 19, 2011, when the company had run out of cash, and only weeks before it filed for bankruptcy.
(This version corrects name of House committee in paragraph 10)
Reporting by Roberta Rampton, additional reporting by Dan Levine in San Francisco; Editing by Russell Blinch and Cynthia Osterman