But what about all that money? In 2009, Fisker applied for a $169 million loan from the Department of Energy, which had established a $25 billion fund to support the production of clean-energy vehicles. Sensing an opportunity to boost the industry in a time of rising gas prices, the DOE actually granted them $529 million, in the hopes of pushing the experimental car to the market sooner. They bought an abandoned General Motors plant in Delaware and made plans to manufacture a cheaper model in the U.S. (The company was headquartered in California, but built the Karma in Finland.)
Then the Karma missed its initial launch date. It finally hit the market with numerous production flaws. At one point there was a recall. The bugs piled up and so did the cost to fix them. The company was losing thousands on every vehicle. After the bankruptcy of solar panel maker Solyndra put the DOE's loan decisions in the spotlight, the government halted the rest of its loans, paralyzing the company's ability to spend more money and starting it on its death spiral.
The Wall Street Journal paints the story as one about the government asking too much too soon, and pressuring a small-scale auto startup to make promises it couldn't deliver. Fox News sees a repeat of Solyndra—betting big on an unproven technology and throwing good taxpayer money after bad when it went south. Documents released earlier this week showed that Energy Department officials were aware of Fisker's production problems but kept giving them money anyway. Conservatives see that as the worst kind of cronyism and another failure of big government spending and the futile search for green technology.
Many people are now saying the Fisker project was doomed from the start, but did it have to be? After all, the government isn't the only one losing money here. Fisker had plenty of big time venture capitalists eager to invest. (They became even more eager after the DOE became a partner.) If Fisker were a normal startup, and not one being counted to revolutionize carmaking, it would probably not have been expected to go from clay models to working production vehicles in three or four years. Tesla Motors, which has also received millions in government loans, had a five-year head start, never turned a profit before last quarter, and still doesn't have a mass-produced vehicle on the road. (Total sales for its two models still number in four digits.) But investors are patient and believe the company is on the right path.
It's true that Fisker Karma was shaping up to be a disaster, but pulling the plug on the Energy loans—and when trouble was at hand—virtually ensured that the problems would never get fixed. The inability of Fisker to pay its bills bankrupted its main battery supplier, another American company named A123 Systmes. The car company will likely file for bankruptcy soon, but unlike General Motors there is nothing left to emerge on the other side and the government won't be able to recoup its investment by taking it over and selling back to the public.