Fisker Automotive, a darling of the Obama Administration’s push for green energy and electric cars has hired the powerful Chicago-based Kirkland Ellis law firm to explore a potential bankruptcy filing, according to reports. The car company, which received a federal $529 million loan guarantee in 2009, furloughed 200 US workers at the end of March to conserve cash. Its bankruptcy would be the latest high-profile failure of Obama’s “green energy” loan program.
The Obama Administration, early in its first term, bet $1 billion in loans to two electric car companies, Fisker and Tesla. Fisker is backed by a venture capital fund, where Al Gore is a partner. Fisker purchased a shuttered GM plant in Delaware, where it said it would build the cars. Vice President Joe Biden attended a press conference announcing the awarding of the loan.
At the time of the loan announcement, Al Gore predicted that tens of thousands of electric vehicles would someday be rolling off the assembly line at the Delaware plant.
More than two years after the awarding of the loan, however, it was revealed that Fisker had shifted its production to Finland, hiring 500 workers there. It was also revealed that only 40 electric cars had been built, of which only 2 had been delivered to customers. One of these lucky recipients was Leonardo di Caprio.
Later this month, the company is scheduled to make a loan repayment to the Department of Energy. The preparations for bankruptcy are in indication that the company will be unable to meet this payment.
The fate of the company should provide another cautionary tale about the government’s inability to pick winners in the marketplace. The capital markets are swimming in liquidity, chasing anything that would provide any kind of investment return. That private money is pouring into “green energy” companies is simply a reflection of the fact that, at least in the near-term, their business models don’t work.
All the federal loans in the world can’t change that.