Another Clean-Car Loan Loss Bites DOE
A $50 million gamble on a Michigan-based manufacturer of wheel-chair accessible vans running on compressed natural gas will cost tax payers $42 million after the company went bust and suspended operations.
Based in Allen Park, Michigan, Vehicle Production Group laid off hundreds of employees and halted operations back in February after having received a $50 million loan in 2011 from the U.S. Department of Energy — only $5 million of which it managed to pay back and another three million that the DOE confiscated from the company’s accounts in April. On Friday, the DOE conceded that in total it would lose around $42 million in taxpayers’ money.
Last week, the DOE auctioned off VGP to military contracted Humvee manufacturer AM General for $3 million — meaning that AM General has bought the DOE loan. AM was already involved in VGP, contracted to build the company’s MV-1 van.
“After exhausting any realistic possibility for a sale that might have protected our entire investment, the Department determined that auctioning the remainder of VPG’s loan obligation offered the best possible recovery for the taxpayer,” Reuters quoted DOE spokesman Bill Gibbons as saying.
AM General has stated that it would resume production of the MV-1 within 45 days. Since VPG shut down operations last March, “demand for the MV-1 has only increased, with a backlog of 2,000 vehicles,” Forbes quoted AM General spokesman Jeff Adams as saying. “No one else is better positioned to build this vehicle,” he said. “We’ve got the workers, and the suppliers are ready to go.”
VPG received the loan in accordance with the DOE’s flurry of clean-car loans — under the auspices of the Advanced Technology Vehicle Manufacturing loan program — including to Fiskar Automotive, Ford (NYSE:F), Nissan, and Tesla Motors (NASDAQ:TSLA).
Of these, the case of Fiskar is the most damaging in the DOE’s portfolio. The DOE approved a $529 million loan for Fiskar in 2011, but the loan was frozen when the company had received only $192 million, while $28 million of that has been seized. Fiskar failed to meet its performance targets, and has lain off some 75 percent of its labor force.
The DOE maintains that losses in its clean energy portfolio represent only 2% of the overall loans and that more than 30 projects remain strong.
Originally written for OilPrice.com, a website that focuses on news and analysis on topics of alternative energy, geopolitics, and oil and gas. OilPrice.com is written for an educated audience that includes investors, fund managers, resource bankers, traders, and energy market professionals around the world.