Fisker Karma: can you say, "crony capitalism?"
Our tax dollars at work… a half-billion dollar loan (actually $529 million) from the U.S. Department of Energy to develop a hybrid toy for the wealthy and/or celebri-licious (like Leonardo DiCaprio, one of the first customers) that, in real world driving, won’t get much better mileage than your average crossover utility vehicle. Not only that, but the cars are manufactured in Finland — that’s right, Finland — and shipped here for sale, where their purchasers will then receive a $7,500 tax credit for buying one (the “cheap” base model starts at $96,895, with the full-zoot Eco Chic model going for a bargain $108,900).
I generally try to keep this blog pretty much clear of politics. But I’ll make an exception for this. Staring out the windows of my lunch room this afternoon, I saw something intriguing enough to get me to scarf down my lunch and get myself out into a gray, drizzly afternoon to check it out. Across the street from my building, a very large automotive transport truck with a fully enclosed trailer unloaded four cars of a type I had never seen before. They looked somewhat like big, four-door Chevy Corvettes, with voluptuous curves leading to a sleek rear end. People on the sidewalk next to the cars crowded around them and took photos with their camera phones.
I headed downstairs to see what the heck the cars were. I thought they might be one of the new four-door luxury electric models from either Tesla or Fisker, which I’d read about but hadn’t yet seen pictures of. What threw me, though, was spotting a round gas tank door on the rear driver’s side flank, plus dual exhausts. Not electric, I thought. By the time I got downstairs and across the street, the cars had been moved a block away, to the front of the Mandarin Oriental Hotel, a luxury hotel in Southwest Washington, DC. I spotted the driver of the auto transport rig and asked him what he’d been hauling. He said four of the brand-new Fisker Karma performance hybrid sedans. Oh, gas-electric hybrids, I thought; that explains the gas tank and the exhausts. He said he’d had the devil of a time getting into this corner of Southwest Washington. Most of the city’s highways had been off-limits to his giant truck, and then he had found several local streets blocked by Occupy DC protests taking place at MacPherson Square, our local version of Occupy Wall Street. He said this was Fisker’s big roll-out. The head of the company, Mr. Fisker himself, was present at the Mandarin Oriental Hotel to do a press conference.
I walked over to the front of the hotel to get a look at the cars. Pretty damned nice, I’ll certainly admit, with a sleek roof lined with solar panels that, according to the company’s claims, give up to five additional miles per week of all-electric driving. While I was standing there admiring the four identical silver cars’ lines, a cabby exited his ratty old Crown Victoria and wandered over next to me, a look of rapt admiration on his face. “Nice, but it’s not for the likes of you and me,” I said. He nodded a little sadly, circled the cars, then returned to his cab.
I recalled reading that the Federal government had become a major financial partner in Fisker Automotive. That would explain the official rollout taking place in Washington. When I got back to my computer, I looked up the specifics. We the taxpayers are on the hook for more than half a billion dollars, about the same amount that got loaned to Solyndra, another “green manufacturer,” before they went bankrupt. At least Solyndra was manufacturing their products in this country, providing American manufacturing jobs (if short-lived jobs), and making a product that average Americans could conceivably afford. Fisker is manufacturing these gorgeous Leonardo DiCaprio toys in Finland. And the kicker, for those of you who would still claim that the risk of half a billion tax dollars is justified by environmental gains… contrary to the company’s initial hype, the Karma will only run for thirty-two miles on its electric motors before its turbocharged gasoline engine needs to kick in (as opposed to the initial estimate of fifty miles). Once that occurs, the Karma gets about the same mileage as a Ford Explorer. Not the new Explorer, even. The older, gas-hog, body-on-frame model. We’re talking twenty miles per gallon, folks. So much for your “green investment.”
Those Occupy Wall Street-types in their tents at MacPherson Square? If they really, truly are bugged by corporate welfare, they need to schlep their signs and their chants and their anger over to the Mandarin Oriental Hotel. Right now. Because the Fisker Karma is where the rubber meets the road when it comes to corporate welfare.
I have no problem with a group of entrepreneurs raising money from private investors to build a hundred thousand dollar toy for rich folks who want to flaunt their eco-consciousness. When and if that’s the case, may they have all the mazel in the world. But damn, it steams me up when my family and every family in America are forced to pay for it.
Al Gore is on the list of customers waiting to receive their Fisker Karmas, having put in his order before the DOE signed off on the company’s half-billion dollar loan. Oh, and by the way, it just so happens that several major investors in the company are also major donors to the Democratic Party. And here’s information on John Doerr, an advisor to President Obama who is also a major investor in Fisker Automotive. Can you say, “crony capitalism?”
Update: The analysts at Green Car Reports, “the ultimate guide to cleaner, greener driving,” worry that the Fisker Karma may discredit the entire Department of Energy loan program. Given that, in a comparison of EPA mileage ratings between the two “American made” (scare quotes present due to the Karma being manufactured in Finland, with its electric motors and batteries being sourced from China) plug-in hybrids now on the market, the Chevrolet Volt and the Fisker Karma, the Volt is “rated at 94 MPGe in electric mode, and 37 mpg on gasoline, with an electric range of 35 miles,” whereas the Karma is rated at “54 MPGe in electric mode; 20 mpg in range-extended mode,” with an electric range of just 32 miles, they may well be right to worry. Oh, and Fisker conveniently left out that little detail about “20 mpg in range-extended mode” in their press releases sent out in the last few days. Details are for the little people, don’t you know…
Update #2: Howdy to all you Instapundit readers! Hope you enjoy your visit. And if you happen to enjoy science fiction with a Libertarian outlook, you may want to check out my third novel, The Good Humor Man, or, Calorie 3501. It’s just been reissued by Tachyon Publications as a Kindle ebook.
[…] out the “American made car” that will receive green tax credits when sold in the US. Share this:TwitterFacebookEmailLike […]
Nice, interesting post. And nice investigative reporting on another government fiscal fiasco.
Yes, good job; and just try to find this information in the mainstream media.
This is Crony SOCIALISM not Crony Capitalism. Both are bad. But Crony Socialism – especially this kind with a strong stench of green pablum – reeks of hypocrisy at a levels I cannot stomach.
I wouldn’t call it crony socialism — the government doesn’t own Fisker Automotive. Yet. But the hypocrisy element really got my gander up. Wonder if Al Gore and Leonardo DiCaprio availed themselves of the $7,500 tax credit for buying their toys? Aren’t they against tax breaks for the rich?
Cronyism is one of the most insidious forms of corruption.
Consider also what just happened in a federal court in Texas where trustees were appointed. A Dallas business owner was involved in a civil dispute and paid millions of dollars to lawyers, and when he objected to additional fees after settling the case, they had a “friendly” judge seize all of his possessions, without any notice or hearing, and essentially ordered him under “house arrest” as an involuntary servant to the lawyers. The business owner has been under this “servant” order for 10 months and is prohibited from owning any possessions, prohibited from working, etc..
…and some quotes from the judge:
THE COURT: “I’m telling you don’t scr-w with me. You are a fool, a fool, a fool, a fool to scr-w with a federal judge, and if you don’t understand that, I can make you understand it. I have the force of the Navy, Army, Marines and Navy behind me.”
THE COURT: “You realize that order is an order of the Court. So any failure to comply with that order is contempt, punishable by lots of dollars, punishable by possible jail, death”
http://www.lawinjustice.com has an explanation of this case.
This was a deal brokered by Al Gore back in the days of “global warming”. Shortly thereafter, Obama got the Nobel Peace Prize for which he was “humbled” and “puzzled” that he should receive such an award with such little time on the job. But, he accepted it anyway.
[…] First Solar and now this: I have no problem with a group of entrepreneurs raising money from private investors to build a […]
they are beautiful cars, but they would be much better if all the electric stuff were removed and replace with a Corvette drive train. Probably get better mileage too.
Yes, but then they wouldn’t be “green” would they. They would be just another rich kids sports car, which of course is what they actually are.
Surely anything associated with “Leonardo DiCaprio” is discredited with all but pre-pubescent girls.
They tore down an old Ford Dealership on the corner of El Camino Real & Arastradero Rd. in Palo Alto and are building a new Fisker/McLaren dealership… McLaren??
There’s already a Ferrrari/Maserati dealer on the other side of Atherton in Redwood City. No commercial business is allowed in Uber-exclusive Atherton…
Oh My God.
This is corruption, graft and racketeering of the first order.
Is there no way to stop this? This is Monstrous.
This is not Crony Socialism, it is Socialism…
AAAAAAAAAAAAAAHHHHHHHHHHHHH!!
Wesley Mouch Update…
Andrew Fox writes, Those Occupy Wall Street-types in their tents at MacPherson Square? If they really, truly are bugged by corporate welfare, they need to schlep their signs and their chants and their anger over to the Mandarin Oriental Hotel…….
http://www.autoblog.com/2009/10/27/fisker-gm-delaware-plant-official/
[…] Fisker Karma Solyndra on Wheels | Fantastical Andrew Fox. […]
ABC is plodding behind you…
http://abcnews.go.com/Blotter/car-company-us-loan-builds-cars-finland/story?id=14770875
Mike, thanks for the heads-up on the ABC News article. I appreciate it!
You jerk: Writing an insightful article and inducing me to buy your e-book. For shame!
Rick, please consider me appropriately shamed. Thanks for taking a look at The Good Humor Man — hope you really enjoy it! Let me know what you think (or, if you’re really feeling ambitious, maybe you could post a review on Amazon…?).
Obama Loans Car Company Half a Billion So They Can Builds Cars in Finland…
By Matthew Most, Brian Ross, and Ronnie Greene, ABC NewsWith the approval of the Obama administration, an electric automobile company that received a $529 million federal government loan guarantee is assembling its first line of vehicles in Finland, sa…
[…] Andrew Fox writes, Those Occupy Wall Street-types in their tents at MacPherson Square? If they really, truly are bugged by corporate welfare, they need to schlep their signs and their chants and their anger over to the Mandarin Oriental Hotel. Right now. Because the Fisker Karma is where the rubber meets the road when it comes to corporate welfare. […]
“But damn, it steams me up when my family and every family in America are forced to pay for it.”
Well, not really. Do you mean hypothetically?
The figure you mentioned is what you are going to pay for the last 9 days in Afghanistan. You didn’t care any more about the last 9 than the next 9 and it’s been going on for a decade. You didn’t get a “one week free” certificate from China for that any more than Obama got for this.
Meanwhile, you’ve got an opinion about the worthiness of the end product of this investment, but getting nothing in return doesn’t rate any complaint. Fantastic.
But what national interest does a half-billion dollar investment in Fisker Automotive serve? Environmental benefits are so scanty as to be non-existent (we’re talking a low-production model that may sell 5,000-10,000 units a year worldwide, and its real-world mileage is nothing to crow about). It doesn’t support manufacturing jobs in America (in Finland and China, yes). It doesn’t support the development of an American battery or automotive electric motor industry, either, as those components are all being sourced from China. The fact that the purchasers of these luxury toys will receive a $7500 tax credit is just the insulting icing on the cake. Crony capitalism is corrosive to the structure of our society, whether is is Enron, Solyndra, or Fisker.
I agree with your general premise, but I want to expand on a few things: You state “I recalled reading that the Federal government had become a major financial partner in Fisker Automotive.” I have some background in the financial industry and whenever I hear the term ‘partner’ some form of equity or ownership. The Obama Administration speaks of these loans as investments, this too is misleading. The Feds loaned money to Fisker, like they did with Tesla. ‘We the people’ loaned the billionaire owners taxpayers’ money at a nominal rate. In the unlikely event that these companies become successful what do the taxpayers get? We get our money back plus a small amount of interest. What do the actual partners receive?
Historically, high risk venture capital investments offer astronomical returns, but carry a commensurate amount of risk of losing it all. How big can the returns be? Just ask the founders of Pay Pal and Google, as they are investors in Tesla. Or ask Al Gore, as his hedge fund is a Fisker owner. A real partner in a venture capital investment can see their investment increase 100 fold or more, or they can lose it all. Which is why investments in this type are limited to only the most affluent investors.
Why did the government ‘need’ to make this loan? Why couldn’t the owners loan some of their own vast wealth to the company? They have plenty of their own money why not use it? Could it be that there was a substantial risk of default? Why not get a loan from a bank? I would bet that no bank would lend these guys money without requiring them putting some type of personal guarantees from the billionaires or possibly requiring an equity position with the companies. Taking an equity position would dilute any future profits from the initial investors.
These loans are bad policy for the government. Someone should get a hold of some former FDIC regulators and ask them how they would react if they saw this loan on the books of a local bank. My guess is that bank would be heading into receivership faster than Obama heading to a fundraiser in the Hamptons!
I have ZERO issue with millionaires becoming billionaires; I celebrate wealth and free market true capitalism. I would argue that if the average voter actually understood what went on with Solyndra, Tesla and Fisker the 2010 elections will look minor compared to the drubbing Obama and Company would take in 2012!
The bottom line: Money was taken from struggling families and business owners, loaned to companies at below market terms and rates so that these billionaires would not have to risk as much of their own wealth. In the very likely event that these ventures fail, as MOST venture capital deals do, the owners would lose substantially less money because the American citizens are underwriting a substantial amount of the risk, WITHOUT any of the upside potential.
I wonder if the Feds will start a program that would allow me to place a bet on a long shot at the horse track, bail me out if the horse loses, but keep all the profits if the old mare wins.
[…] are some performance details of the Fisker car supplied by blogger Andrew Fox: I recalled reading that the Federal government had become a major financial partner in Fisker […]
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[…] Story: http://www.fantasticalandrewfox.com/2011/10/19/fisker-karma-solyndra-on-wheels/ Tags: $529 million on green car, $529 million on green car that get same mileage as a SUV, $529 […]
[…] Carl Close | Friday October 21, 2011 at 1:26 PM PDT The title of this post comes from the fantastical Andrew Fox, who laments another case of corporate welfare promoted in the name of energy conservation: the […]
“Oh, and by the way, it just so happens that several major investors in the company are also major donors to the Democratic Party. ”
I wonder, are there any of these “green” boondoggles where the major investors are NOT also major dem donors. I dont even think these deserve the name crony capitalism, since even crony capitalist enterprises normally make a profit. I prefer a more old fashioned name, graft, the Chicago way. Mind you, Bush had his share of crony capitalism and graft, but these guys make Bush and Cheney look like pikers.
My relatives in Finland like to thank you.
Tell them they’re very welcome. And maybe someday their government can spend some of their tax dollars paying to have cars manufactured over here in Detroit.
You’re massively misinformed and you’re doing a disservice to your readers by disseminating this disinfo.
Fisker is buying and retooling a plant in Delaware. The money from the loan is going to help put Americans to work.
http://green.autoblog.com/2009/10/23/report-fisker-going-to-delaware-for-project-nina-plant-quantum/
Sir or ma’am, I’ll believe it when I see it. I suspect they’ll no longer be in business by the time that factory is scheduled to open. Not with their initial offering falling so far short of its performance/mileage promises and substantial increases in price.
I wish the demonauts would stop whining about republicans ‘picking on Obama’. What did they do to Bush his entire 8 years? Didn’t they boycott congress once to avoid voting on a bill? He inherited Clinton’s first balanced budget then two wars. Some believe the zillionaire George Soros had more to do with 9/11 than the taliban.
He and bill ayers gave a big fundraiser at Ayers mansion. Word is Soros was there, with Acorn pres. (his brother in prison), code pink, and a bunch of bankers. Why would bankers be at a fundraiser? They weren’t from the FR were they?
Last zing… Solyndra was one of 20. Obama gave over $15 billion to 5 states. California got the most, over $11 billion. Prologis received the most, $1.4 billion. It’s based in CA but located internationally. It’s a solar comp, global distribution center, real estate trust.(?) How does that work exactly, with the energy department? Why did Obama give China millions for their solar power while selling them investments in American companies?
p.s. Investigate George Kaiser.
[…] Solyndra on Wheels? […]
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Government at work… Like Milton Friedman said, “If the government were in charge of the Sarah desert, in five years there would be a shortage of sand!”
[…] Of course, the affordable price makes up for it: […]