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Green Cars Fail To Deliver

WASHINGTON – The Obama administration has poured roughly $5 billion in taxpayer funds into the electric-car industry, offering incentives to manufacturers, their suppliers and even car buyers who might want to go green.

But analysts say the risk is rising that taxpayers in many cases will not see a return on their money soon, if ever. Instead, they warn that some federally subsidized companies could be forced to shut down in coming months.

For President Obama, who has made clean-technology investment a hallmark of his job-creation efforts, troubles in the electric-car sector pose a potential new political problem after the collapse of solar-panel maker Solyndra, which recently defaulted on a half-billion-dollar federal loan after filing for bankruptcy. The administration has channeled an estimated $80 billion of the stimulus recovery effort into grants and loans to clean energy and energy efficiency programs, companies and research.

Obama predicted in 2008 that green cars would create thousands of new U.S. jobs as demand soared. But, in recent months, production lines and sales expectations have been dramatically scaled back.

A123 Systems, a battery maker that received $380 million in government support, announced recently that declining orders had forced layoffs. Instead of up to 3,000 new Michigan jobs as Obama and the company had predicted, it now has 690 employees.

Battery maker EnerDel, recipient of a $118 million federal grant, took a hit when its key customer, electric-car maker Think, declared bankruptcy this year. Johnson Controls, which received a $299 million stimulus grant, opted to build one factory instead of two because of lower-than-projected demand, a company official said, and that one is now operating at half capacity.

California electric-car maker Aptera announced it was shutting its doors because of problems raising capital. And General Motors – whose moderately priced Volt was supposed to drive Obama’s push for 1 million alternative vehicles by 2015 – revealed last week that it would fall roughly 38 percent shy of its goal of selling 10,000 Volts this year.

“Many in this industry have jumped the gun on how aggressive the growth of electric vehicles will be,” said Kevin See, an analyst at Lux Research.

Supporters of Obama’s green-car initiatives say there are still industry bright spots and that this start-up sector will simply take longer to deliver results.

Alex Molinaroli, a Johnson Controls vice president, said the funds give U.S. factories the capacity to deliver when demand arrives and position them as industry players.

“Is it worth the premium?” Molinaroli said. “We’ll have to wait a long time to see if this was a good investment or not.”

Obama started his alternative-vehicle push in the 2008 campaign, and his administration soon after put real money behind the plan. Like Solyndra, several of the firms receiving support had investors who were also important Obama campaign donors.

Nissan, Tesla Motors and Fisker Automotive received $2.4 billion in loans to support building U.S. manufacturing plants for electric vehicles through an Energy Department program. In a stimulus push in August 2009, Obama announced $2.4 billion in more than 40 grants to car industry firms, much of it to advanced battery manufacturers.

The president said the strategy would revive the country’s manufacturing base while nurturing a domestic green-car industry. At the time, many auto analysts questioned whether federal subsidies would create a glut of electric batteries and cars.

Obama reasserted his goal in his January State of the Union address, and the Energy Department made hopeful projections. In February, an agency report said U.S. car production “should be sufficient to achieve the goal of one million EVs by 2015,” with enough capacity to produce 44,000 of the top seven electric vehicles in 2011.

Actual sales of those models this year stand at 16,800 – roughly two-tenths of 1 percent of 2011 domestic auto sales. The vast majority were Chevrolet Volts or Nissan Leafs, which were in development long before Obama took office.

Some experts said the administration’s political goal – quickly announcing job creation in a recession – conflicted with the practical realities of expanding a complicated auto industry and wooing consumers.

White House officials say the electric-car emphasis has had a positive impact by accelerating the shift from foreign oil dependence.
— This article appeared on page A1 of the Albuquerque Journal

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