The Department of Energy's $535 loan gurantee to bankrupt solar startup Solyndra has become the Obama Administration's first quasi-scandal, with critics insisting that the government shouldn't be funding risky green-energy companies and supporters (myself included) arguing that the government is the only investor that can handle the risk. But now the bickering has spread beyond solar to the go-go world of electric vehicles — just as "Revenge of the Electric Car," the sequel to "Who Killed the Electric Car," is hitting theaters.
ABCNews and the Center for Public Integrity have teamed up to investigate DOE loans guarantees, focusing on two marquee EV companies, Tesla Motors and Fisker Automotive, which together have received about a billion in government-backed financing. The takeaway isn't pretty:
The loan to Fisker is part of a $1 billion bet the Energy Department has made in two politically connected California-based electric carmakers producing sporty -- and pricey -- cutting-edge autos. Fisker Automotive, backed by a powerhouse venture capital firm whose partners include former Vice President Al Gore, predicts it will eventually be churning out tens of thousands of electric sports sedans at the shuttered GM factory it bought in Delaware. And Tesla Motors, whose prime backers include PayPal mogul Elon Musk and Google co-founders Larry Page and Sergey Brin, says it will do the same in a massive facility tooling up in Silicon Valley.
People I know who are in the know about EVs have always had questions about Fisker, which does seem to be having trouble getting its cars to market and making good on a plan to take over an old General Motors plant in Delaware. (Vice-President Joe Biden was on hand for the announcement in 2009.)
Tesla, on the other hand, staged what is now looking like a successful IPO last June and is now trading at $28/share, significantly above its IPO price of $17, if not quite at its highs of about $36.
Other DOE loans guarantees went to Ford and Nissan, for $5.9 billion and $1.6 billion, respectively. You could call those hedges against failures by Tesla and Fisker — safer bets, if you will.
But as far as EV funding goes, you can see how the DOE was attempting to do with electric cars what it was doing with thin-film solar manufacturers, of which Solyndra was one: backstop not the operations of individual companies, but the creation of entire industries. In this respect, the DOE was out VC'ing the VCs, acting as a super-venture-capitalist with the capacity to assume worst-case-scenario risk.
So what's an acceptable loss under these circumstances. My quick math suggests that of around $8 billion in loan guarantees doled out by the DOE to support advanced transportation, Fisker's $529 million amounts to about 6.6%. Nissan and Ford aren't in danger of going out of business, so even if Fisker were to pull a Solyndra and declare bankruptcy, that would be an acceptable failure.
Besides, with what Tesla is now worth, it could pay back its loans with equity. And still have $2.5 billion left over — more than twice the value of the original DOE $1 billion investment in the space.
Remember, the DOE is trying to create an electric-car industry here. It's not going to fail at 100 percent. But it's not going to succeed at 100 percent, either.
[Curious about Solyndra? Check out my rundown, for everything you need to know.]