Obama's Electric Cars vs Romney's Economic Erosion

In a nutshell, Republican presidential candidate Mit Romney has received a serious campaign lashing over his corporate, American-job-outsourcing past, and his response to that is to take the Obama administration to task over electric cars.

The two issues are only very loosely related in terms of jobs, but in a campaign season one is forced to examine unrelated issues as they are unnaturally enjoined through over-the-top television ads.

So, let’s start with electric cars, which the Romney camp is targeting over two start-up loans from the Energy Department, one for Fisker Automotive Inc for $529, and the other for Tesla Motors Inc for $465 million.

Certainly, the fact that Fisker is forced to delay production (and, hence, new jobs) of its next-generation electric sedan, which was supposed to begin this summer, is very unfortunate for the Obama administration so close to elections.

In order to lend the electric car industry the proper perspective, however, we need to step outside the campaign rhetoric. So, for anyone not enthralled by the televised campaign ads, here is a sober look at the industry.  

California-based Fisker has used $193 million of those funds to develop its first electric vehicle, the Karma. The funds were used on development in the US, and while the first car was actually assembled in Finland, the loan was not used to finance that part of the operation. The electric cars are not “from Finland”, as the Romney ad purports.

The rest of the loan has been frozen as Fisker rethinks its strategy and delays production for its next-generation family sedan, which was to be produced in Delaware where it would create some 2,000 factory jobs.

The company has suffered a number of losses primarily due to a manufacturing mistake in its outsourced plug-in hybrid battery, so the “Fisker Atlantic” project is on hold temporarily. Production, originally scheduled to begin this summer, will be delayed, and Fisker has said it would not make a new decision on a production venue until the end of the summer. Chances are, the Fisker Atlantic will not come off the line by the end of the year, as planned. Furthermore, not only are the 2,000 factory jobs postponed, but Fisker has had to lay off 71 of its workers. 

The Karma hasn’t exactly shot off the starting blocks, having to recall its first round of vehicles late last year over a coolant leak problem.

"As Fisker works through those issues and incorporates lessons learned from the production of the Karma, the department is working with Fisker to review a revised business plan and determine the best path forward so the company can meet its benchmarks, produce cars and employ workers here in America," according to Energy Department spokesman Damien LaVera, cited in the Detroit News.

Then we have Tesla Motors Inc, another beneficiary of Energy Department loan largesse.

As a start-up, Tesla has been more successful, and its work has indeed been groundbreaking from a technology perspective. Tesla hopes to be turning a profit by early next year on its Model S sedan, with CEO Elon Musk (founder of PayPal) saying the company already has 10,000 orders for the sedan and will deliver 20,000 in 2013. (Incidentally, the Model S sedan hits 60mph in 4.4 seconds and can travel up to 300 miles without recharging.) Enough analysts believe that Tesla has a shot at mass production to compete with the likes of electric-hybrid cars put out by Chevrolet and General Motors. Tesla has yet to make money, but the potential is there.

For now, these are easy targets for Romney, but the electric car industry is not in such peril as the TV ads would have us believe.

In fact, the electric car industry is proving its resilience. According to the Kelley Blue Book Market Report for July 2012, despite declining gas prices, sales of hybrid and alternative energy vehicles surged more than 164% in June and if gas prices continue to decline, any decline in electric car sales should be “relatively mild”.

The hot issue for the campaign is jobs, and these electric car start-ups are easy and obvious targets for Romney, who is busy creating distractions from a decidedly over-the-top Obama administration ad about his history of moving American jobs off shore and his reluctance to release all of his tax returns (and particularly those from 2009) to public scrutiny.

Without getting into advertising sophistication and the vulnerability of the masses to televised cheese and powerful images and sound bites, let’s just look at the jobs issue as it relates to Obama’s electric car gamble and Romney’s corporate past.

First, Obama’s electric cars. The Fisker and Tesla loans were bound to come under scrutiny when they failed to suddenly create thousands of jobs. While there is less ammunition to take the administration to task over Tesla, the Fisker flop in the run-up to elections is not helpful to the campaign. The failure to begin production and add the promised 2,000 factory jobs in Delaware is a key failure that stands out to the average voter.

But let’s lend a little perspective here: We’re talking about a delay in 2,000 factory jobs for Fisker. A look at Romney’s corporate history is certainly more interesting in terms of American jobs.

While one can easily get lost in the dramatic soundtrack and the Obama drama, there are some accusations here that are spot on. As CEO and co-founder of Bain Capital, Romney was party to practices that primarily outsourced American jobs and did a great deal to create the current unemployment situation. And certainly, the assemblage of the Fisker in Finland is difficult to compare with the offshore investment of Romney’s Bain Capital.

Romney’s argument is that he retired “retroactively”, from 1999, and is thus not responsible for the decision-making that went on even while he was still CEO. Government documents, however, show that Romney remained chief executive and chairman of the firm three years beyond the date he said he ceded control.

The essence of this Bain Capital history is that Romney and the other “privileged 1%” made their massive wealth via leveraged buyouts (hostile or friendly takeovers of established companies using loans) that cost tens of thousands of jobs and moved production in many cases overseas, eroding the US economy. Electric car loans are rather innocuous.

By. Charles Kennedy