Bloomberg News

Van Maker VPG Joins Fisker as Green-Car Lending Flops

May 09, 2013

Van Maker VPG Joins Fisker as Obama Green-Car Lending Failures

Senator Jeff Flake, an Arizona Republican critical of government loans to businesses, said VPG’s closing is another sign the clean-car program is a failure and burden on taxpayers. Photographer: Andrew Burton/Getty Images

The shutdown of a wheelchair-van maker financed by U.S. taxpayers is adding to congressional criticism of clean-energy lending by President Barack Obama’s administration that’s been a target since the 2011 bankruptcy of solar-panel maker Solyndra LLC.

Vehicle Production Group LLC, a closely held startup that received $50 million in Energy Department financing, has ceased operations and fired almost all of its employees, its former chief executive officer said yesterday. Car maker Fisker Automotive Inc., which received $193 million from the same loan program, missed the first payment last month and has also stopped production.

Senator Jeff Flake, an Arizona Republican critical of government loans to businesses, said VPG’s closing is another sign the clean-car program is a failure and burden on taxpayers.

“Basic research is one thing, but handing out money to companies is quite another,” Flake said in an interview. “We don’t have a good record and it needs to stop.”

The $25 billion Advanced Technology Vehicle Manufacturing loan program was created by Congress in 2008, near the end of President George W. Bush’s second term, to spur development of more fuel-efficient vehicles.

Republicans last month held a hearing on why the Energy Department approved Fisker for assistance. The program has also been marked by the loans it didn’t make. General Motors Co (GM) (GM). and Chrysler Group LLC withdrew applications after they languished, and a number of startup companies failed after being rejected for loans or not getting an answer.

3 Percent

The car program loaned one-third of the money Congress gave it and hasn’t approved a deal in more than two years. VPG’s loan, approved in March 2011, was the last and smallest among five deals totaling $8.4 billion.

If both Fisker and VPG default on the entire amounts they’ve received, the $217 million lost would be less than the $10 billion reserve Congress built into the program and about 3 percent of the amount lent.

Ford Motor Co (F). said in a May 1 filing with the U.S. Securities and Exchange Commission that it has $5.5 billion outstanding on its $5.9 billion loan after making two quarterly payments. It said it plans to make quarterly installments of $148 million through June 2022.

Tesla Motors Inc (TSLA)., led by billionaire Elon Musk, drew down its entire $465 million and made its second quarterly payment, for about $13 million in its quarter ending March 31, it said yesterday on its website. The company has said it plans to repay the loan ahead of schedule.

‘Performing Well’

Nissan Motor (7201) Co. received $1.4 billion to develop its all-electric Leaf and the batteries that power it. The company previously has declined to release the balance or payment schedule on its loan. Spokesman Travis Parman had no immediate comment.

“Overall, our portfolio is performing well, and as a result, many ‘first of a kind’ technologies that seemed risky three years ago are considered safer bets today and are being rapidly installed around the country,” Aoife McCarthy, an Energy Department spokeswoman, said in an e-mail.

The vehicle program is one of three Energy Department programs to provide loans and loan guarantees to private-sector companies developing more energy-efficient technologies. Solar-panel maker Abound Solar Inc. and Beacon Power Corp. (BCONQ:US), an energy-storage company, also failed after borrowing taxpayer money, and Solyndra received $535 million in U.S. loan guarantees.

No Funding

The Energy Department, citing missed production milestones, cut off Fisker’s access to its loan to develop plug-in hybrid cars after it drew down $193 million of its $529 million initial commitment. Last month, the department seized the $21 million in a reserve account Fisker had to set up as part of the loan agreement after the company couldn’t make its first scheduled payment.

VPG, based in Allen Park, Michigan, shut down because it didn’t have enough cash to make payroll, said John Walsh, who left about a month ago as its chief executive officer. The Energy Department seized the $5 million in VPG’s reserve account, he said.

VPG last year finished drawing down its full loan amount and didn’t make any repayments, Walsh said.

“We did have to suspend operations,” Walsh said yesterday in a telephone interview. “We just didn’t have the funding to pay them, so they had to move on to other jobs.”

Regulatory Ruling

VPG had said it would produce about 6,000 vehicles this year. The company hasn’t produced vehicles for about six months, Walsh confirmed.

The company hasn’t filed for bankruptcy and has two potential buyers, Walsh said, declining to name them.

There haven’t been bids for VPG’s assets, according to an investment source who asked not to be identified because the process is private.

VPG, which Walsh said has three employees left out of about 100, failed despite winning a regulatory decision in December that Chrysler Group LLC said would create a monopoly on selling wheelchair-accessible minivans to U.S. transit agencies.

The company’s vans, which sell for about $40,000, were made at an AM General LLC plant in Indiana that had been used to produce Hummer sport-utility vehicles for then-General Motors Corp. GM abandoned the brand in its 2009 bankruptcy.

Flake said congressional opponents of the program that funded VPG, Fisker and Solyndra need to intensify efforts to end it.

“We shouldn’t authorize money for it, we shouldn’t appropriate money for it,” he said. “It’s Congress that needs to stop these programs. Many of us have tried to block the funding, but we need to try harder.”

To contact the reporter on this story: Angela Greiling Keane in Washington at agreilingkea@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net


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