The green automaker Fisker Automotive filed for bankruptcy last week as the Obama administration sold off the financially troubled firm’s loan guarantee for a $139 million loss.
This may not be the end for Fisker, though, as the bankruptcy filing was done with plans to be acquired by the same Chinese group that also bought the company’s loan from the Obama administration.
Last week, the government sold its $192 million Fisker loan to the newly formed Hybrid Technology — a group formed by Chinese billionaire Richard Li — for $25 million. After taking into account what the government was able to recover from Fisker, taxpayers were left with a $139 million bill for the failed automaker.
“After having evaluated and pursued all other alternatives, we believe the sale to Hybrid and the related Chapter 11 process is the best alternative for maximizing Fisker Automotive’s value for the benefit of all stakeholders,” said Beilinson, Fisker’s chief restructuring officer. “The Fisker Automotive technology and product development capability will remain a guiding force in the evolution of the automotive industry under Hybrid’s leadership.”
Despite the sizeable loss to taxpayers, the Energy Department says that the administration’s actions on the loan protected taxpayers from losing even more money.
“In 2009 and 2010, when the U.S. auto industry was struggling to come back from the brink of collapse, the Department of Energy invested to ensure that not only would the U.S. industry recover, but that we would also be able to compete and thrive in the growing global market for advanced electric and fuel efficient vehicles,” DOE spokesman Bill Gibbons said in an emailed statement.
“Recognizing that these investments would include some risk, Congress established a loan loss reserve for the program, and the Energy Department built in strong safeguards to protect the taxpayer if companies could not meet their obligations,” Gibbons added. “Because of these actions, along with the sale announced today, the Energy Department has protected nearly three-quarters of our original commitment to Fisker Automotive.”
Gibbons added that the Fisker loss only represented less than 2 percent of the Energy Department’s green auto loans, and less than 1 percent of the department’s overall green loan program — which is more than $30 billion.
However, Republicans have criticized the Obama administration on the failed loan, saying the government shouldn’t be acting like a venture capitalist.
“Fisker’s collapse closes yet another sad chapter in DOE’s troubled portfolio,” said Republican Reps. Fred Upton of Michigan and Tim Murphy of Pennsylvania. “The jobs that were promised never materialized and, once again, taxpayers are on the hook for the administration’s reckless gamble.”
“According to reports, the administration was warned as far back as 2010 that Fisker was doomed, but it was not until our Solyndra investigation revealed the dysfunction within the loan program that DOE finally took notice and cut off further payments,” the Republicans added. “But still, taxpayers are only recouping 28 cents for every dollar of the $192 million the administration handed out.”
Fisker listed as much as $500 million in assets and $1 billion of debt in its bankruptcy filings, reports Bloomberg. The company’s assets include a shuttered factory in Wilmington, Delaware that was supposed to be reopened.
The company continually failed to meet government benchmarks to get taxpayers dollars, but only had their loan taken away from them in 2011 after the Solyndra scandal put increased scrutiny on the Energy Department’s loan program.
Fisker’s luxury hybrid vehicle sold for more than $100,000 per vehicle. The company’s technical defaults began in 2011, in part due to “lower-than-required earnings before interest, taxes, depreciation and amortization, and failing to meet a production milestone of at least 11,000 vehicles sold to dealers for an average of $87,500 by Sept. 30, 2011,” Bloomberg reports.
Hybrid Technology will purchase Fisker’s assets and give the company $8 million in debtor-in-possession financing for the sale and restructuring.
“HT is committed to building upon the Fisker legacy and presence in the United States as a foundation for the design and manufacture of advanced hybrid electric vehicles,” said HT spokeswoman Caroline Langdale “We will work to realize the full potential these fantastic cars offer in helping to remake the auto industry for the 21st Century.”
“As we continue to examine Fisker’s opportunities, we will be making decisions about the structure and footprint of the new business,” she added.
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