By Ayesha Rascoe and Deepa Seetharaman
(Reuters) - Republican lawmakers said the U.S. government missed early warning signs that its loans to electric carmaker Fisker Automotive could be in trouble, and kept money flowing even after the startup missed a key 2011 production deadline.
Members of the House Oversight Committee cited Department of Energy documents at a hearing on Wednesday as showing Fisker got $32 million in payments, even after it failed to launch the Karma vehicle in February of 2011 as planned.
They spent hours quizzing current and former Fisker executives and an Energy Department official, over what the lawmakers termed the government's "bad bet," and questioned whether the unproven company received special treatment that put taxpayer dollars at risk.
The sporty Karma's $100,000-plus price tag and trappings of Hollywood glamor also drew barbs.
"Taxpayers effectively subsidized luxury, novelty vehicles for the likes of Justin Bieber, Leonardo DiCaprio and Al Gore," said Jim Jordan, the Republican from Ohio who chairs the subcommittee which held the hearing.
Under fire is the DOE's decision in 2009 to grant the company a $529 million loan only to see it veer toward failure - a chain of events that echoed Solyndra, the U.S. government-backed solar manufacturer that went out of business in 2011.
"The government is a very poor venture capitalist," said Patrick McHenry, a Republican from North Carolina.
Nicholas Whitcombe, the former acting director of the car loan program, defended the government's actions.
"We make our calls based on the merits of the transactions," Whitcombe said.
Energy Department officials have defended the auto loan program, saying it helped to bring the industry from the brink of collapse during a severe economic downturn. Mainstream carmakers like General Motors were key beneficiaries, and their revival has been widely acclaimed.
But Fisker's troubles are the latest in a string of green automotive technology flops, including last year's bankruptcy of its lithium-ion battery supplier, A123 Systems .
Forecasts in 2009 for sales of hybrid and electric vehicles far outstripped subsequent demand. Only about 2,000 Karmas have been sold.
Documents cited at the hearing pointed to signs Fisker was headed for trouble even before 2011. An email in June 2010 from an outside consultant to the Department of Energy said a Fisker disbursement request may be in "limbo due to lack of compliance with financial covenants."
FOUNDER TESTIFIES
Henrik Fisker, founder and former CEO, said the Anaheim, California-based company, which has not built a vehicle since July last year, can still bounce back and repay nearly $200 million in government loans if is able to find the right "financial and strategic resources."
"I do not believe that any taxpayer dollars have been lost," Fisker told lawmakers.
Testifying about his eponymous company, the Danish-born Fisker, 49, who was forced to resign as chairman in March, blamed problems with its parts suppliers, delays in regulatory approval and recalls of its flagship Karma plug-in hybrid sports car for the company's struggles.
"After resolving initial launch challenges, the cars perform well and customers love them," Fisker asserted.
Republicans spent hours criticizing the loan at the hearing. But Henrik Fisker told lawmakers that the company was encouraged to apply for money in 2008 by the Republican administration of President George W. Bush. The loan was then approved by Barack Obama's administration.
Fisker's failure to make a payment on the DOE loan on Monday was the latest of its troubles. In recent weeks, Fisker has fired 75 percent of its workforce and hired bankruptcy advisers.
Republicans said Fisker received the DOE loan despite its junk bond rating and unproven track record.
"The Obama administration owes the American taxpayer an explanation as to why this bad loan was made in the first place, and what they are going to do to minimize the loss that taxpayers face," said Jordan, the hearing chairman.
DOE BACKING BOOSTED FISKER
The DOE's backing helped put Fisker, which was founded in 2007, on the map. With government guarantees in hand, Fisker has gone on to raise $1.2 billion in private funds to date, according to SEC filings.
The 2009 loan signaled that the DOE had done a rigorous review of the project, said Salo Zelermyer, a senior counsel at the DOE under the Bush administration, who also helped create the auto loan program.
"It's fair to say the projects the DOE chose to proceed with were clearly given an added credibility with folks on the outside," said Zelermyer, now a senior counsel at Bracewell and Giuliani in Washington.
Fisker tapped $192 million of its $529 million before the DOE quietly decided to freeze Fisker's credit line in June 2011.
Neither the DOE nor Fisker publicly disclosed that decision until early 2012. Lawyers and a DOE official said the department was not obligated to divulge the decision.
In the confidential "information statement" sent to shareholders in December 2011 and obtained by Reuters, Fisker said it "will not meet certain financial covenants and project milestones" required in the DOE agreement, including earnings, net worth and certain financial ratio targets.
The terms of Fisker's loan pact with the DOE were enough to put off potential suitors, including Chinese automaker Geely Automobile Holdings Ltd . The conditions included an obligation to restore capacity and jobs at the company's Delaware plant according to a schedule imposed by the U.S. government.
Since the high profile failure of Solyndra, a topic brought up regularly by Republicans during President Barack Obama's 2012 re-election campaign, the Obama administration has become far more risk averse when doling out loan payments.
Solyndra, the first loan recipient and first major failure for the department's portfolio, received more than $527 million of its $535 million loan before filing for bankruptcy.
(Reporting by Deepa Seetharaman and Paul Lienert in Detroit, Ayesha Rascoe in Washington and Nichola Groom in Los Angeles; Editing by Ros Krasny, Matthew Lewis, Leslie Gevirtz and Tim Dobbyn)
Source: http://news.yahoo.com/republicans-slam-u-bet-electric-carmaker-fisker-005843871--finance.html
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iOS 7 is probably right around the corner, at least as a preview coming at Apple's Worldwide Developer's Conference in June, and it looks like it might be the most exciting change to Apple's mobile OS we've seen in a long time, at least on the surface. iOS 7 will get a flat visual look, which is all the rage these days, at the hands of Apple's chief design guru Jony Ive, according to a new report by 9to5Mac. The blog's sources say that it's "very, very flat," losing any evidence of computer-generated shine, glare or the skeuomorphism reportedly favored by deposed iOS chief Scott Forstall.
