It appears if a company focuses on green products or services then it should not seek funding from the federal or state governments in order to survive. Why? Past reports show that they keep closing down.
The latest report from a Jalopnik investigation found that more than half (56 percent) of green automakers have either gone bankrupt or just shut down operations after they were subsidized by the federal government. It was discovered after the publication made Freedom of Information Act requests for the documents showing that 10 of the 18 green carmakers have failed.
Since 2008, automakers have applied for loans through the United States Department of Energy’s Advanced Technology Vehicle Manufacturing Program (ATVM). A total of approximately $5 billion has been handed out to five companies: Tesla, Ford, Nissan, Fisker Automotive and the Vehicle Production Group (VP) – the last two companies have already ended production of their vehicles and are slowly shutting down.
VPG was reported to produce around 22,000 gasoline and natural gas-powered vehicles each year and generate about 900 permanent jobs. However, after the company withdrew $192 million out of a $529 million loan, when the government cut off its funding, it only created 2,500 MV-1 vans – the firm lost roughly $557,000 on every single one of the 2,000 luxury hybrid Karmas in the entire world. No one car has been constructed since last summer.
During the administration of President George W. Bush, it was believed the ATVM program would help design the newest fuel-efficient vehicles and prepare for the future. However, after three years, the federal government decided to stop doling out cash in the midst of many failed ventures. It is estimated that close to $16 billion remains untouched.
The report found that Fisker owes the taxpayers $192 million, but it has been doubted that it would actually be able to pay back the money. Instead, once again, taxpayers will be the ones fitting the bill.
Here is the list of the taxpayer-funded companies that have failed:
– Bright Automotive ($450 million)
– Aptera Motors ($259 million)
– VPG ($50 million)
– Carbon Motors ($310 million)
– Fisker Automotive ($529 million requested, but only took out $192 million)
– Th!nk City ($276 million)
– Coda Automotive ($526 million)
– Next Autoworks ($340 million)
– XP Vehicles/Limnia ($65 million)
– Bannon Automotive ($40 million)
Economic Collapse News reported late last year that taxpayers were on the hook for $2.6 billion in bankrupt green energy companies. Nearly 20 taxpayer-funded firms went bankrupt, including Abound Solar ($790.3 million), Solyndra ($570 million) and A123 Systems ($377.1 million).
Despite of all of these blunders, other governments from around the world are starting to make similar investments – though, Serbia has decided to cut subsidies by one-fifth. Quartz reported last week that Indonesia is offering lower tax incentives and other perks for low-cost green cars in order to enhance Jakarta’s automobile market. Japanese automakers are already set to make heavy investments and intensify its presence in the market.
Some of the reasons as to why these companies fail is that, as Nobel laureate economist Milton Friedman simply put it, is because it’s not their money to spend and invest. When they use the pockets of the taxpayer the psychology behind it is negligent and irresponsible. Meanwhile, if it’s their own money or financed through private loans then it changes the structure of the business entirely.
A good example of this is Digital Domain Media Group Inc., a taxpayer subsidized film studio in the state of Florida. It was given $135 million by the government over a three-year period, but instead of making wise investments it decided to purchase a lavish headquarters and expensive real estate.
Indeed, if a company loses more than half a million dollars each car they produce then there’s seriously something wrong with the organization’s business model.