This week’s news that startup car company V-Vehicle (see their highly informative website here), which promises to revolutionize the auto industry through a “holistic change…thinking about – from beginning to end – how to reconstruct a car company” fell far short of its capital requirements to access some $130 million in Louisiana Economic Development funds by Monday’s deadline prompts a question few in the state’s higher echelon would like to ask.
Namely, should Louisiana put any more eggs in this basket?
V-Vehicle is a project with a bit of star power to it. Oil magnate T. Boone Pickens is an investor, and the Silicon Valley venture capital firm Kleiner Perkins is a major player – though fraudster Al Gore’s involvement in that firm should be a major black mark in assessing whether V-Vehicle is on the level. The company’s CEO and founder Frank Varasano comes from a successful background at Oracle and Booz Allen Hamilton; he doesn’t come off as a crackpot. And the head of the design team, Tom Matano, gained fame at Mazda as the father of the Miata. So this doesn’t have the look of a flim-flam scheme, Gore notwithstanding.
But V-Vehicle’s capital strategy has been from the start a public-sector strategy. The company is based in San Diego, but it chose to site its main assembly plant in Monroe thanks to a deal Louisiana Economic Development offered to it. The $130 million in incentive dollars the state put on the table depended on V-Vehicle’s raising $350 million in capital of its own, and the strategy Varasano is pursuing to meet that number depends almost completely on getting a $320 million loan from the federal government – specifically the Advanced Technology Vehicle Manufacturing loan program the Department of Energy has put together. The application for that loan was completed last May, Varasano says, and the company claims in a letter to LED secretary Stephen Moret that they’re negotiating final terms and conditions for the funding.
Without the federal government help, which U.S. Rep. Rodney Alexander (R-Monroe) says is still forthcoming after almost a year of everyone involved waiting for it to happen, the project is dead in the water. Already V-Vehicle has to pay the state back $6.2 million in performance grants it was given; Varasano’s letter said the funds should be coming Baton Rouge’s way by next month. One wonders why they can’t just cut a check now given that the deadline wasn’t a secret and they knew they’d need to come up with the money, but perhaps we’re just being persnickety.
On the upside, V-Vehicle says they’ll employ some 1,400 people at the Monroe plant with at least that many jobs created as a result of their presence. What exactly they’re going to make is a question, though; initial speculation about the mystery car was that it would be a hybrid vehicle or run on natural gas, but instead the answer apparently is that it’s just a high-mileage four-door hatchback selling for about $10,000. Supposedly there are 55 working prototypes being finished in California and today in Arizona they’ll be driving one at a test track.
So perhaps this thing is worth riding a little longer given the prestige and political (if not monetary) capital Moret and Louisiana Gov. Bobby Jindal have invested in it. The Ouachita Citizen’s Sam Hanna suggested maybe giving an extension to the company on that $6.2 million. Maybe he’s right. For those of us who think it’s a questionable idea to throw taxpayer money at private companies in the first place, more selling is needed.
It’s our hope that V-Vehicle is what its proponents say it is, and that it makes great cars in Monroe, employs a lot of people and makes a lot of money. But we’re extremely uncomfortable with the state of Louisiana and the localities involved having skin in the game to the tune of seven, eight or nine figures – not to mention the idea that the federal government is going to dole out $320 million in speculative loans to fund a private concern. Seems like an awful lot of socialized risk is involved in this project and a lot less private capital is on hand than there should be. We’d be more comfortable with Louisiana taxpayers being made whole until V-Vehicle can show it’s for real.