DOE: No Soup For V-Vehicle

It appears that V-Vehicle, the rather unconventional car company planning on assembling its fuel-efficient automobiles with new retail prices in the $10,000 range, is now back to the drawing board on financing. The Baton Rouge Business Report has the story:

The federal Energy Department has rejected a V-Vehicle Co. application for $321 million in loans, putting the future of the startup automaker in jeopardy. Company CEO Frank Varasano says he was “extremely surprised and disappointed” by the decision. The state had pledged a $67 million incentive package for the San Diego-based company, which has been modifying the former Guide Corp. headlight plant in Monroe. Varasano says the company will repay the state $6.2 million in incentives already received. He says V-Vehicle’s board will meet to consider its next move. The company sought the loan to begin production of a fuel-efficient vehicle. It planned to employ 1,400 people and said its prototype was in testing, though it has not been publicly displayed.

Gov. Bobby Jindal, who had repeatedly trumpeted V-Vehicle as one of his major economic development accomplishments, says the state will work closely with V-Vehicle to determine alternative funding for the plant. “We will explore every possible avenue to get this project back on track and create new jobs for our people,” he says. Stephen Moret, Louisiana Economic Development secretary, says the move comes as a surprise, since the Department of Energy and his office were directly negotiating the loan application. “The process appeared to be tracking toward a successful conclusion,” he says.

U.S. Sen. Mary Landrieu says she is disappointed with the Energy Department’s decision and wants to know the specific reasons for denying the loan. “V-Vehicle represents not only an important economic development initiative for our state, but an important and transformative innovation in our nation’s transportation sector,” she says.

It would be crass for us to say “We told you so,” since we were really hoping for Monroe’s sake and that of the entire state that the V-Vehicle project would come to fruition and be a viable player in the auto market. But for the same reason we thought the Audubon Alive project at the center of the bond issue in Baton Rouge last year was a loser this thing always appeared to have a redolence of snake oil to it, giving us reason to doubt it would ever fly. The fact that V-Vehicle expected to get to the state’s magic number of $350 million in capital to trigger $130 million in incentives by raising $321 million in federal loan swag, while only raising $85 million through private sources despite having big names like Al Gore/Kleiner-Perkins and T. Boone Pickens on board, was a dead giveaway that this thing was shaky.

Maybe V-Vehicle will find a way forward. If so, let’s hope they do so in the private capital markets, where political cronyism and rent-seeking don’t fly and it’s merit and the meeting of demand which determine success. If they’re able to get the $350 million the project needs the old-fashioned way, perhaps they’ll demonstrate that enough folks are willing to put their cash behind a venture they see as viable to actually make it viable. Scamming a politician looking to build monuments to himself is a formula for soaking taxpayers in red ink. That’s not to say V-Vehicle is your standard boondoggle, mind you – but taking shortcuts via federal swag on the way to get state swag is an illegitimate way to go. Now that door has been closed, and we’ll see if the project can be financed in an honest way with real people putting their money where their mouths are.

In the meantime, we’d like to see the $6 million V-Vehicle owes the state coming back. A cashier’s check or a wire transfer this week will be fine.

And if this is a lesson for V-Vehicle, we hope it’s also a lesson for Louisiana Gov. Bobby Jindal and state economic development secretary Stephen Moret – reeling in out-of-state companies is fine, but if you want to grow the state’s economy your paramount focus should be on growing the state’s businesses. There are lots of locally owned and operated companies in Louisiana who would like to expand and add employees but can’t – because of taxes, because of slow demand, because of a third-rate legal climate, a weak transportation system and workforce issues which Jindal is admittedly on the right track toward improving. Fixing the environment in which these businesses operate will increase the chances a few of them might become the next FedEx or Wal-Mart – or at least the next Community Coffee or Raising Canes.

After all, the New York Yankees have been throwing money at free agents for decades. But the heart and soul of the team is still Derek Jeter, a guy who came up in the farm system. Louisiana needs Jeters, not Roger Clemenses.

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