It’s been more than five years since President Obama signed his misguided economic-stimulus package into law, creating green-energy subsidies and expanding others, but American taxpayers are still feeling its disastrous effects.
This month a deal was reached between competing creditors of much-ballyhooed Fisker Automotive Inc., which went bankrupt after receiving a $529 million loan through the Department of Energy’s (DOE) controversial Advanced Technology Vehicle Manufacturing program. The failure of Fisker highlights ongoing concerns over the Obama administration’s handling of taxpayer-backed investments in so-called “green energy” initiatives.
Once again, overseas companies have emerged as the big winner, with two of China’s largest auto manufacturers set to receive millions in windfall benefits from the sale of Fisker’s operations and the Energy Department loan.
The loan program is overseen by DOE’s Loan Programs Office, which is perhaps best known for its “success” in backing the solar-energy startup Solyndra, which cost American taxpayers more than $500 million. The Loan Programs Office has also provided billions in direct loans to U.S. auto manufacturers to encourage green-energy innovation and, ironically, to help offset compliance costs associated with far-reaching federal standards.
Under the program, Fisker was approved to receive up to $529 million in taxpayer-backed loans. As is the case with many of the Obama administration’s market-distorting green-energy gambles, Fisker proved to be a failed bet and eventually filed for Chapter 11 bankruptcy.
The most recent development in the administration’s green-energy gamble on Fisker has two Chinese auto manufacturers increasing their business capital with American taxpayers footing the bill. First is a subsidiary of China’s Wanxiang Group, a multinational Chinese automotive-components manufacturing company owned by Chinese billionaire Lu Guanqiu. Second is Hybrid Tech Holdings, owned by Chinese billionaire Richard Li.
The two billionaires went head-to-head in a bidding war last year over Fisker’s operations, with Lu Guanqiu winning out with a bid of $149.2 million in a bankruptcy sale. His bid for Fisker is only complemented by his previous purchase of A123 Systems LLC. (A123 Systems was another recipient under the Energy Department’s loan program and much like Fisker, was a failed green-energy gamble that ended up filing for bankruptcy.) Under similar circumstances, he purchased A123 Systems at the expense of the American taxpayers.
Richard Li did not come out empty-handed, considering he purchased the taxpayer-backed loan to Fisker for $25 million at auction. According to a recent article in The Wall Street Journal, Mr. Li paid a “deeply discounted price for the DOE loan, which had a face value of $168 million at the time it was put up for auction.” The article went on to point out that Mr. Li would profit as much as $90 million from his purchase of the loan.
The Obama administration green-energy gamble to prop up Fisker allowed two of China’s largest auto-manufacturing companies to directly receive hundreds of millions in windfall benefits at the expense of U.S. taxpayers. So much for “nation-building here at home.”
Sadly, the Fisker debacle is not even the most recent failure of the Energy Department’s loan program. Just this month, Missouri-based Smith Electric Vehicles announced that it was closing its operations in the United States owing to financial troubles.
Under the department’s loan program, Smith Electric received almost $30 million in funds. In justifying the funds, the White House projected more than 220 jobs would be created as result. However, “Smith only reported the creation of the hourly equivalent of 70.4 jobs — meaning the DOE spent an average of about $414,000 per job created.” The Smith Electric closure further exemplifies the continuing failure of the president’s green-energy gambles.
In a report released this month, the Government Accountability Office advised against continuing the Department of Energy’s Advanced Technology Vehicle Manufacturing loan program. The report suggested that Congress rescind “all or part of the remaining credit subsidy appropriations to the loan program, unless the [DOE] can demonstrate sufficient demand for new ATVM loans and viable applications.”
Even so, the Obama administration looks set to double down on their bad green-energy bets with a public push recently for the controversial program. The Energy Department’s website cites a remaining $16 billion in loans still available to applicants. It’s time for the Obama administration to pump the brakes on the loan program, and wind down this taxpayer-funded jackpot that allows Chinese interests to capitalize on the U.S. mistakes.
Justin Sykes is a policy analyst at Americans for Prosperity.