American Elephants

Adventures in Venture Capitalism by The Elephant's Child

Consumer Reports buys the automobiles it tests anonymously, so there can be no question that it was not just an ordinary car off the dealer’s lot; tests automobiles before they report on them, and the reputation of the magazine rests on their expertise in testing.

The Fisker Karma luxury car retails for over $100,000 (at that point do you still bargain to get it down from $103,000 to $102,000?) And as has been widely reported it ran for 180 miles and quit.  They had to come and take it away. Fisker dispatched two engineers to examine the car.

This is more bad news for a company that already had recalled some Karmas. They also changed their CEO and halted production over the past month as it seeks to renegotiate the terms of their $529 million loan from the U.S. Department of Energy. In November, A123 reduced its full-year revenue outlook after Fisker unexpectedly cut orders. Then in December, they recalled 239 Karmas due to a possible defect in batteries made by supplier A123 Systems that could cause a coolant fluid leak and electrical short-circuit. In January , Fisker halted sales for four days to fix a software malfunction that at times triggered warning lights while temporarily freezing navigation systems.

The car, everyone agrees, is absolutely gorgeous. The price tag is something else again, even with a government subsidy — and Obama wants to raise the subsidy from a $7,000 tax credit to $10,000 and perhaps change it from a tax credit to something more immediate.

Problems with new technologies can be expected, and they are all having them. The Tesla roadster turns into an immovable brick if the battery runs down. The Chevy Volt had some incidents of the battery catching on fire.  Federal safety officials opened an investigation last November into the safety of the battery pack. Nevertheless, the electric cars are remarkable examples of new technology.

It is beyond unfortunate that at a time when the economy is in the tank, with no real signs of recovery; when the auto bailout has been shown to be so full of fraud; when, although Obama brags that GM is now once again the world’s top car company, there are no signs of the stock recovering enough to pay the taxpayers back for the loans; with all that going on — the president decided that the federal government should become a venture capitalist to decide what technologies to support.

Real venture capitalists do very hard-nosed investigations of the real prospects of a company and look for proof that at some point the investment will actually pay off. The administration substituted hopes and rainbows for investigation, and after all, it’s just taxpayer money—there’s more where that comes from. Venture capitalists have some resounding successes, and those help pay for the mistakes —but it is their own money on the line along with their shareholders so they are pretty careful with it.

I do not pretend to be anything other than a real ignoramus when it comes to cars, but I have read the history of electric cars — they are hardly a new idea. And always, success was just around the corner, the next big thing, for over 100 years. One engineer whose comments I read, said that they had exhausted the periodic table of elements in battery technology, and a breakthrough would have to include something presently unknown to science or engineering. There’s a lot of technology that says as soon as we can figure out a solution to this very particular problem we will succeed, and it will happen, we’re working on it.  The problem of electric batteries, he said, was of a different nature — something unknown.

So what Obama has to show for the massive investment are some very good-looking cars that are way too expensive for most people. They say the Fisker Karma has 400 cars sold.

On the other hand, there is the Chevy Volt. Climatologist Patrick Michaels knows a thing or two about CO2 emissions. He claims that it should be called the Chevy Vote — to remind voters of the funding invested by the Obama administration and how very, very wrong it has all been. Buying votes in a state vital to the president’s reelection, subsidizing “rich” taxpayers, corporate cronyism and coercion. GM says there are 3,600 unsold Volts. The Wall Street Journal and Autoweek say there are 6,300.

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