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GOP senators feeling bad Karma
Grassley, Thune see waste of federal backing of high-priced hybrid car
Question of the Day
Two senior Republican senators have questions about the Obama administration’s approval of more than a half-billion dollars in taxpayer funds to help a California automaker build hybrid subcompact cars in Finland that will cost buyers more than $100,000 each.
Sens. Chuck Grassley of Iowa, ranking member of the Senate Judiciary Committee, and John Thune of South Dakota, a member of the Senate Banking Committee, want Fisker Automotive Inc. of Anaheim, Calif., to explain “what went wrong” in its selection by the Energy Department for a $529 million federally guaranteed loan to build the advanced technology vehicles, raising questions on whether department officials properly vetted the loan guarantee.
Describing Fisker Automotive as a “troubled” company, Mr. Grassley and Mr. Thune said taxpayers “deserve an accounting of what went wrong with the Fisker loan” and whether the Obama administration “misled the public about the economic benefits” of the expensive government-guaranteed loan.
“The riskiness of loans to companies that may or may not be able to pay them back deserves scrutiny,” Mr. Grassley said. “The taxpayers can’t and shouldn’t have to subsidize these decisions.”
In a letter Monday to Tom LaSorda, Fisker’s chief executive officer, Mr. Grassley and Mr. Thune asked how many of thousands of new jobs promised by the loan’s approval have materialized. In a separate letter last month to Energy Secretary Stephen Chu, the senators noted that the Energy Department said the loan guarantee would “create thousands of new American jobs.” Vice President Joseph R. Biden praised the loan and Mr. Chu said it would put “Americans back on the job.”
The Energy Department awarded the $529 million loan guarantee on April 22, 2010, for the development and production of two lines of plug-in hybrid electric subcompact vehicles. To date, $193 million has been dispersed to Fisker to fund eligible expenses for the “Karma” vehicle and to partially fund the purchase of a former General Motors plant in Delaware. The Energy Department froze the credit line in May 2011 after ruling the company had not met milestones set as part of the project. There also was concern that the vehicles the company was proposing to build would be too expensive for most of the public.
“There continues to be more questions than answers when it comes to the Obama administration’s decision to loan Fisker Automotive $529 million of taxpayer funds,” Mr. Thune said. “Although taxpayers have already lost millions on bad Obama administration loans, this administration continues to ignore our basic questions on how these risky bets were made.”
Fisker spokesman Roger Ormisher said in an email that all of the $193 million the company had received had been spent in the United States, resulting in the creation of 400 direct and 600 indirect jobs in this country and 250 in Finland. He also said Fisker primarily is funded by private equity and that since its founding, it had raised more than $1 billion in private equity.
Mr. Grassley and Mr. Thune said the Energy Independence and Security Act of 2007 requires the creation of a direct loan program from the federal government to car companies through the Advanced Technology Vehicles Manufacturing incentive program. They said Fisker’s planned vehicles, selling for between $50,000 and $100,000, seemed to indicate that they would be “out of reach” for most Americans.
They also said a February 2011 report by the Government Accountability Office noted that Fisker received the Energy Department loan guarantee after the Karma was classified by the department as a subcompact-performance vehicle. But the GAO said the classification did not accurately reflect the type of vehicle Fisker intended to build under the program, noting that “vehicles that are known in the industry as ‘subcompacts’ generally are not luxury vehicles.”
The lawmakers also questioned whether the company’s vehicle production in Finland diminished the goal of developing advanced vehicle technology to create jobs in the United States.
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