Another alternative vehicle company that received a federal loan guarantee from the Obama administration has quietly closed its doors and laid off all its employees after it failed to meet financial benchmarks required to keep getting taxpayer dollars.
Vehicle Production Group CEO John Walsh said that the company has stopped production and laid off about 100 staff. However, the company has not yet sought bankruptcy protection. Walsh said that the federal loan was spent wisely on his company and that he hoped the loan would be repaid if the company is sold.
“I hung in there as long as I could,” says Walsh, who was only CEO for about a year before going to another company. “I saw the handwriting on the wall months ago. We just couldn’t get the capital to keep it going.”
The company was given a $50 million loan guarantee by the Obama administration in 2011 to build the MV-1– a six-passenger, wheelchair-accessible van that would run on compressed natural gas. The vans went on sale in 2011 at a starting price of $39,950.
However, The Washington Post raised questions about the loan in 2011, pointing out that VPG was part of a portfolio of companies under the investment firm Perseus. Perseus vice chairman James Johnson was an adviser and fundraiser to President Obama. Another notable investor in the company was T. Boone Pickens.
The Detroit Free Press reports, “Perseus said at the time that Johnson played no role in procuring the loan for VPG. The Energy Department said at the time that the loan was based entirely on its merit after two years of review.”
The company was estimated to produce up to 22,000 gasoline and natural gas-powered vehicles annually and create 900 permanent jobs. however, the company stopped production six months ago after the DOE cut off its funding — they built 2,500 MV-1 vans.
“They wanted us to get the remaining capital raised and we couldn’t get it done,” said former VPG CEO Dave Schembri.
VPG is the second DOE-backed vehicle company to find itself in dire straits this year. Fisker Automotive has been circling the drain and even hired a law firm and crisis management PR firm to handle a potential bankruptcy filing.
The Fisker loan, however, was substantially larger than the one given to VPG and represents the biggest potential taxpayer loss since Solyndra — $171 million.
Fisker got a $529 million loan guarantee to produce 11,000 luxury hybrid vehicles by 2011 and 75,000 of a second vehicle model by 2012. Last month, the Obama administration seized $21 million from Fisker as part of its repayment of the $192 million in loans the company drew upon.
According to the research firm PivCo, Fisker was losing about $557,000 on each car it sold since it spent $660,000 in taxpayer dollars and venture capital funds on vehicle and sold them for $103,000.
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