Ever since Department of Energy loan-recipient Solyndra closed its doors this summer, the whole “green energy loan” process has been under intense scrutiny by Republican politicians. Cries of “crony capitalism” have been the rallying cry against green energy loans to fledgling companies, but here is one example where the DOE loan process came up short. Bright Automotive is shutting its doors, over three years after they first put in a loan request with the DOE.
Bright Automotive was trying to bring a plug-in hybrid delivery van called the “IDEA” to market. Electric motors would power the rear-wheels for up to forty miles before a GM (or in the prototype’s case, Chrysler) 4-cylinder engine kicked in. 100 mpg via both electric and gas engines was the goal, and a laudable one at that. Such fuel economy would be a big boon for small businesses. GM Ventures had already invested $5 million into the company, and the idea certainly seemed solid.
Unfortunately for Bright Automotive, the Department of Energy loans they first sought in 2008 still had not come through after four revisions to the plan. Each time the amount of private capital the company had to come up with rose. Their first application asked Bright to raise $120 million in private equity for a $314 million low-interest loan. By the fourth revision, the DOE was demanding Bright come up with $345 million in private equity for a $314 million loan.
Bright CEO Ruben Munger and COO Mike Donoughe called the most recent loan terms “outlandish” and “unacceptable” to potential investors. They went on to say that, had they sought known they would need to raise that much private equity, they would have gone to China instead. Ouch.
In terms of jobs lost, 60 people now find themselves unemployed. Had the Bright Automotive delivery van gone into production, it would have employed hundreds, and potentially thousands, at a former HUMVEE plant once owned by AM General.
It does make one wonder if there is something to these cries of crony capitalism though. Ford, Nissan, and Tesla were only required to raise 20% of the DOE loan application in private equity back in 2009; Bright Automotive was being asked to raise about 110% of their loan application. One would think if they could raise that much capital in the first place, they wouldn’t need the DOE loan money so bad.
This feels like a political ploy, a sacrificial lamb if you will. With all the scrutiny on the loan process, perhaps Obama wants to say look, here’s a great idea that went under because our government would not help. Perhaps he is hoping to avoid another Solyndra “scandal” before elections this November.
Maybe Bright’s business plan wasn’t good enough. Maybe the DOE process is more onerous than some politicians would have us believe. Or maybe who you know matters more than what you know. Definitely a conflicting view of the easy-breezy DOE loan process some politicians are talking about.
What are your thoughts on this sad turn of events for a promising idea?
Source: Green Car Reports