April 24 (Bloomberg) -- Fisker Automotive Inc., the electric-car maker that missed its first payment on a U.S. loan this week, sought taxpayer financing at the urging of President George W. Bush’s administration, its co-founder said.
The company, which fired three-quarters of its workforce this month, began its slide for a variety of reasons, Henrik Fisker said at a congressional hearing today.
After the U.S. Energy Department pushed the company to apply for a loan, suppliers provided parts that were subject to safety recalls, its battery supplier went bankrupt and Superstorm Sandy destroyed shipments of assembled cars, he said in the remarks.
“Some have alleged that the company only received the loans due to political connections,” said Fisker, who resigned from his company March 13. “I am not aware and do not believe that any improper political influence was used in connection with the company’s loan application or subsequent negotiations with the Department of Energy. We were approached and encouraged to apply for a loan by the department.”
Fisker was among the witnesses who testified before a subcommittee of the Republican-controlled House scrutinizing the $529 million in loans to Fisker, which Republican presidential candidate Mitt Romney last year called a “loser” and a recipient of “crony capitalism.” The company, based in Anaheim, California, hasn’t produced a car since July.
President Barack Obama’s administration announced a conditional loan approval for Fisker in September 2009, eight months after he took office.
Henrik Fisker, though, said he was approached at a sustainability conference in California by John Mizroch, formerly an acting assistant energy secretary, “soon after” the company debuted the concept of its $103,000 Karma at the Detroit auto show in January 2008.
“We discussed the technology that Fisker Automotive was developing and he encouraged the company to apply” for a loan, which it did at the end of the year, he said.
Mizroch, who left the department in January 2009 and is now a consultant, said that while he has known Fisker since he worked there, he doesn’t recall talking with him about the advanced-vehicles loan program, which wasn’t created until later in 2008.
“I think Henrik’s recollection is inaccurate,” Mizroch said in an e-mail. “I have no recollection of talking to Henrik about the AVTM program while I was at DOE.”
Fisker declined to answer reporters’ questions after the hearing.
The vehicle loan program was created in a law passed by Congress, and signed by Bush, to spur development of more fuel-efficient vehicles including plug-in electrics.
“It is hard to understand why the Department of Energy ever thought Fisker was a viable company that should receive taxpayer money,” Representative Jim Jordan, the Ohio Republican who is chairman of the subcommittee, said in an e- mailed statement. At the hearing, he criticized the choice of Fisker as a recipient given its credit rating, lack of collateral and poor cash flow.
The company raised private capital “before we heard of” the U.S. loan program, Bernhard Koehler, Fisker’s chief executive officer for Europe and the Middle East, said in prepared testimony. Fisker, for whom Koehler had been chief operating officer, raised $1.2 billion from investors, Koehler said.
While Fisker’s access to its loan was frozen in June 2011, the company and the Energy Department didn’t make that public until the following year.
Fisker missed its first payment due on the loan on April 22. It drew down about $193 million of its balance before the Energy Department cut off its access after the company missed milestones it was required to meet for production of the Karma.
Nicholas Whitcombe, former acting director of the Energy Department’s Advanced Technology Vehicles Manufacturing Loan Program, defended the loan program and the decision to lend to Fisker.
“The department has acted decisively to protect the taxpayers’ interest since it became evident that Fisker faced financial difficulties,” Whitcombe, who now works in a different loan office at the agency, said in his testimony. “The department is continuing to communicate with Fisker regarding its obligations under the loan agreement, and is committed to ensuring that the taxpayers’ interests are protected to the maximum extent possible.”
Whitcombe said there were about 150 applications to the vehicle loan program. Five loans were granted.
In June 2010, less than two months after Fisker’s loan was finalized, Sandra Claghorn, then an Energy Department loan official, said in an e-mail released by the committee that the company’s request to draw money might not be honored because it wasn’t meeting loan requirements.
The “Fisker draw request may be in limbo due to lack of compliance with financial covenants,” Claghorn said in the June 2, 2010 e-mail.
“The document shows that one person at a meeting discussed the possibility that Fisker might not meet a financial commitment, which had to be certified as met by the company before a loan disbursement,” Aoife McCarthy, an Energy Department spokeswoman, said in an e-mail. “The department received that certification five days later, and subsequently disbursed on the loan.”
The same e-mail from Claghorn talked about the status of loan applications from other companies seeking funding from the vehicle loan program, which last granted a loan when it had $4 billion remaining.
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