ABC Uncovers Scandal: Electric-Car Companies Using Federal Money To Create American Jobs

Blog ››› ››› TODD GREGORY

ABC News has published a lengthy article on its website that misleadingly suggests taxpayers are being ripped off because a car company that got a federal loan guarantee is assembling its vehicles in Finland. The story is headlined "Car Company Gets U.S. Loan, Builds Cars In Finland."

In fact, the article reports that the company, Fisker Automotive, has created 100 auto-plant jobs in Delaware in addition to 500 manufacturing jobs in Finland. Fisker's founder also told ABC that his company has spent the federal money it has received on marketing, engineering, and design work done in the United States, not on the Finnish jobs.

Here are the first four paragraphs of the article:

With the approval of the Obama administration, an electric car company that received a $529 million federal government loan guarantee is assembling its first line of cars in Finland, saying it could not find a facility in the United States capable of doing the work.

Vice President Joseph Biden heralded the Energy Department's $529 million loan to the start-up electric car company called Fisker as a bright new path to thousands of American manufacturing jobs. But two years after the loan was announced, the job of assembling the flashy electric Fisker Karma sports car has been outsourced to Finland.

"There was no contract manufacturer in the U.S. that could actually produce our vehicle," the car company's founder and namesake told ABC News. "They don't exist here."

Henrik Fisker said the U.S. money so far has been spent on engineering and design work that stayed in the U.S., not on the 500 manufacturing jobs that went to a rural Finnish firm, Valmet Automotive. [emphasis added]

Twenty-eight paragraphs later, readers learn that Fisker has indeed created auto-plant jobs in the U.S.:

The announcement that the plant would re-open followed a heavy lobbying push by Delaware politicians from both parties, who cited the news as a sign of industry's turnaround. In September 2009, Republican Rep. Mike Castle wrote directly to Energy Secretary Steven Chu, saying the Fisker proposal had "great merit," and urging Chu to give the company "careful consideration" for the loan.

The governor and state politicians took turns, along with Biden, to proclaim the project to cheering blue-collar workers clad in jeans, caps and jackets. They said it would produce thousands of jobs and have cars rolling off the line by next year. Fisker said he remains convinced those jobs will come. While he has hired marketing, design and engineering teams in the U.S., the auto plant jobs in Wilmington right now number about 100. [emphasis added]

Henrik Fisker explained that the Department of Energy told him that federal loan money could not be spent in Finland:

In a lengthy interview, Fisker said he apprised the Department of Energy of his decision to assemble the high-priced Karma in Finland after he could not find an American facility that could handle the work. They signed off, he said, so long as he did not spend the federal loan money in Finland -- something he says the company has taken care to avoid. He said the decision, ultimately, was to help prevent his company from following the path of Solyndra, which exhausted nearly all of its loan money on a high-tech solar manufacturing plant in Freemont, California.

"If you just start doing like what Solyndra did, making a factory in a place where it was too expensive to manufacture ... [you] obviously fail," he said. [emphasis added]

And the DOE confirmed this in a statement released Thursday night:

While the vehicles themselves are being assembled in Fisker's existing overseas facility, the Department's funding was only used for the U.S. operations. The money could not be, and was not, spent on overseas operations. The Karma also relies on an extensive network of hundreds of suppliers in more than a dozen U.S. states.

The article also suggests the Obama administration improperly loaned money to Fisker and Tesla Motors, another electric car company, because Obama donors are involved in the companies' financing:

An investigation by ABC News and the Center for Public Integrity's iWatch News that will air on "Good Morning America" found that the DOE's bet carries risks for taxpayers, has raised concern among industry observers and government auditors, and adds to questions about the way billions of dollars in loans for smart cars and green energy companies have been awarded. [emphasis added]

However, the article reported that both the administration and the companies denied impropriety in the awarding of the loans, and the article offered absolutely no evidence to contradict their statements:

And the DOE confirmed this in a response to ABC's article:

While the vehicles themselves are being assembled in Fisker's existing overseas facility, the Department's funding was only used for the U.S. operations. The money could not be, and was not, spent on overseas operations. The Karma also relies on an extensive network of hundreds of suppliers in more than a dozen U.S. states.

ABC News sent questions to the White House Monday and requested an interview with the vice president. Biden was not made available, but an official in his office said "the Office of the Vice President did not encourage the Department of Energy to choose any particular company over any other but, like others in the Administration, supported the Department's loan program and the creation of car manufacturing jobs in the United States."

Energy Department officials have been steadfast that politics never entered the picture and each project was screened by professionals and secured on the merits. And executives from Tesla and Fisker said they won government support because their projects had the best shot at success. They said the involvement of well-connected figures in their companies should not suggest they attempted to use special influence to secure the loans.


[Diarmuid O'Connell, vice president of corporate and business development for Tesla Motors] said political muscle played no role in the company's award of the $465 million in loans, noting that the initial application was filed under Bush -- though landed under Obama.

Furthermore, the article makes much of the fact that Tesla has not yet reported a profit: "Tesla's SEC filings reveal the start-up has lost money every quarter." Later, it says:

Tesla has yet to turn a profit and suffered net losses in each quarter. "Since inception and through the three and six months ended June 30, 2011, we had accumulated net losses of $522.8 million," its most recent 10-K form shows.

But as the Department of Energy told ABC, investing in innovative technology is inherently risky, but necessary to stay competitive:

Energy Department officials said such loans, by their nature, are risky because the department is financing innovative, potentially game-changing technologies that could deliver long-term benefits. They said neither firm has missed a loan payment, or sought help from the department to restructure their lending agreements. [emphasis added]

The 2,700-word article closes with a fact that further diminishes the sensationalism of the headline: The cars that Tesla has made so far have been assembled in Menlo Park, California, and the company's main assembly plant is in Fremont, California:

The Roadster was produced in small quantities with the body assembled by Lotus in the United Kingdom and final assembly by the company at its facility in Menlo Park, Calif. The Model S, by contrast, will have much greater volume and be manufactured in Fremont, Calif. The company said production will begin next year.

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