Carlin: Wall Street Owns Washington

They’re At It Again! The Government Wants To Bring Back Corporate Welfare Programs For Automakers


Wolf Richter   www.testosteronepit.com   www.amazon.com/author/wolfrichter

They’re at it again! The government wants to bring back a zombie. Originally created by Congress in 2007, the Advanced Technology Vehicle Manufacturing Program provided low-cost government loans that were subsidized, guaranteed, and then in part eaten, as we now know, by hapless and strung-out American taxpayers.

Ford was the top beneficiary. While bragging vociferously that it hadn’t been bailed out by the government, as opposed to GM and Chrysler, it received a $5.9 billion loan under that program ostensibly to retool its plants and start producing electric vehicles. Those billions were in addition to other Federal programs, including subsidized loans from the Export-Import Bank (example). Though Ford has plenty of hybrids, it doesn’t have, despite the $5.9 billion, anything resembling a plug-in EV.

Nissan got $1.4 billion to build its plug-in EV, the Leaf. Tesla got $465 million. It is building a few, very expensive plug-in EVs a day. With its highflying stock, it prints its own currency and used some of it to pay off that loan in May.

Others weren’t so “successful.” Fisker was awarded a $529 million package. But in May 2011, the Department of Energy, after paying out $193 million, cut Fisker off; it was supposed to have produced 14,000 cars by then but had only slapped together a few hundred. Superstorm Sandy then mangled 338 of those Karmas that would have normally sold for $100,000 a pop – a pop because their batteries exploded. They’d been made by A123, also a beneficiary of bi-partisan boondoggle money, now bankrupt. In early April this year, the DOE seized the $22 million remaining in Fisker’s account. By that time, the company had laid off 75% of its staff. There is salvation on the way, however. A German group is rumored to contemplate buying what’s left for a measly $25 million. The remainder of the $1.4 billion, including the $1.2 billion that Fisker had weaseled out of private investors? Gone up in smoke.

Energy Secretary Ernest Moniz praised the office at the DOE for how it handled the program and for its “due diligence.” And he added, “I think it shows in the portfolio.”

But what the government is funding isn’t exactly a new technology. On September 14, 1899, a guy named Henry Bliss got run over by a taxi in Manhattan. A plaque points out that he was the first automobile fatality in the “Western Hemisphere.” The taxi was a plug-in EV. As were 90% of the taxis in New York City and about 30% of all cars sold in the US. Most other cars were steam-powered. They had a longer range and more power. And a marketing advantage: speed records. They were great for long trips, such as to the next town, but you had to preheat the boiler. So, plug-in EVs were better for tooling around town. But they had a more limited range, and it took a long time to charge the batteries. Very familiar problems today, in the otherwise ideal and mature technology.

Other companies tried to finagle their way into the DOE loan program but after years of talks abandoned their applications, including bankrupt and bailed out GM and Chrysler … and Coda. It bought cars without powertrains from Chinese automaker ChangAn Hafei, installed its electrical equipment, and sold them for $37,250! That didn’t work too well. While it didn’t get the $334 million in taxpayer money it had applied for, it burned through $300 million from private investors – including ex-Secretary of the Treasury and bailout goon Hank Paulson – and filed for bankruptcy protection.

After these rousing successes, the $25 billion corporate welfare program petered out in 2011. But now the Obama administration wants to resuscitate it (though last month, a House Appropriations Committee panel voted to use those funds to pay for other things, like wildfire fighting). The DOE is actively considering what a new loan solicitation program might look like, DOE Secretary Ernest Moniz told the Detroit News. “That’s an ongoing discussion,” he said.

And it’s not necessarily his initiative. Members of Congress, including Sen. Debbie Stabenow, D-Michigan, have urged Moniz to figure out how to expand the program to include not just automakers and wannabes, but also component makers – though the industry is booming at the moment. They all could use the moolah, those that haven’t moved to China.

The DOE has “a lot of authority” remaining, not only in the Advanced Technology Vehicle Manufacturing Program but in another one for renewable energy systems, electric power transmission systems, and bio fuels, Mr. Moniz said. He was “pretty bullish” on EVs – though it’s unlikely that the few plug-in EVs made these days will add to the 1 million that presidential candidate Barack Obama set as a goal to have on the road by 2015. And the other thing is, over a third of the energy to power these “zero-emission” cars comes from … coal.

This is just a tiny detail in the vast pile of corporate welfare programs, lobbied for by our corporate heroes, and put in place by our honorable members of Congress, eager to collect whatever funds they can, however they can, to keep their jobs and live the good life. So we shouldn’t be too harsh on some companies blowing a few billions in taxpayer dollars, when others – the giants – are getting hundreds of billions.

And they do it according to the book. So, no one accused Apple of having violated US tax laws. The Senate hearings merely exposed how it has dodged income taxes by doing what multinationals do: taking advantage of handouts and loopholes that Congress handed them. Turns out, much of the discussion was based on a fairytale. Read…. Revealed: Apple’s “Offshore” Cash Isn’t Even Offshore.