President Obama made a high-profile visit in May 2010 to Solyndra Inc., a solar-panel manufacturing plant in Fremont, Calif. The company received $535 million in loans from the Energy Department and was a centerpiece of the Obama administration’s economic stimulus effort. “Companies like Solyndra are leading the way toward a brighter and more prosperous future,” Mr. Obama chirped. On Wednesday, Solyndra closed its corporate headquarters, announced that it’s filing for bankruptcy and laying off 1,100 workers.
The Solyndra debacle is a case study in the failure of government intervention in the economy. Founded in 2005, the company manufactured a rooftop solar panel designed chiefly for commercial applications. Solyndra was a poster child of the utopian future envisioned by the Obama administration when oodles of green jobs would relieve the nation’s unemployment rate, generate clean energy and help the environment. Energy Secretary Steven Chu rushed through loan guarantees, and money began to flow to Solyndra from the Federal Financing Bank. The terms of the loans, just more than 1 percent interest in most cases, were well below the rates competitors had to pay.
Competition in the solar marketplace is stiff, particularly from China, and Solyndra couldn’t make a profit. In the spring of 2010, the company spent around $3.5 million promoting an initial public stock offering (IPO) to raise $300 million to retire some of the government debt, but the company couldn’t escape an inconvenient truth: In the first three quarters of 2009, it grossed $59 million against production costs of $108 million. Solyndra argued that economies of scale would eventually drive down the red ink, but the investment community wasn’t impressed, and the IPO was withdrawn.
When government loan guarantees of more than half a billion dollars were secured, Solyndra bragged that its new plant expansion would create 3,000 construction jobs and 1,000 permanent manufacturing positions. On a plant-site visit, Vice President Joseph R. Biden Jr. enthused, “These are jobs that won’t be exported.” Not so, Joe. After the failure of the IPO attempt, Solyndra sent half its manufacturing to China.
The House Committee on Energy and Commerce is attempting to investigate Solyndra and the extent of its political connections to the White House, but it’s being stymied by no-show witnesses and White House refusal to turn over records. One of the company’s leading investors, oil billionaire George Kaiser, was a campaign-donation “bundler” for the 2008 Obama campaign. An investigation by the Government Accountability Office found the Department of Energy announced Solyndra’s loan approval “prior to completion of external reviews required under procedures.” Earlier this month, the Office of Management and Budget agreed to comply with a House subpoena for up to 1,800 pages of records related to the Solyndra loan decision.
Whatever sweetheart, back-channel deals the investigation eventually reveals, the lesson is that it takes more to survive in the marketplace than just trendy green credentials, political pull and a boatload of taxpayer cash. Last year, Mr. Obama said, “The true engine of economic growth will always be companies like Solyndra.” Let’s hope not.