When Green Fades to Red: The Solyndra Scandal
Solyndra, a solar panel maker based in Fremont, CA, seemingly imploded overnight. Once the pride and joy of the Obama administration's efforts to back green technology, this once seemingly unstoppable force backed by more than a half billion in taxpayer money closed their doors earlier this year, leaving a lot of questions unanswered.Advertisement:
Did You Say Half a Billion Dollars?
Yes, half a billion dollars was dispersed to Solyndra in the form of a Treasury Department loan, backed by the Energy Department. $535 million dollars total was guaranteed to Solyndra under the Obama administration's stimulus plan, and most of this money had already been doled out at the time of bankruptcy. To top things off, congressional auditors recently announced the Energy Department may have shown favoritism in regards to some loan-guarantee applicants, one of which was Solyndra.
Republicans have been loudly decrying the loan, going as far as calling it a "green casino" used to gamble taxpayers money. A quick look behind the curtain reveals there may have been some doubts voiced behind the scenes as to Solyndra's viability prior to the loan being approved. What Republicans fail to mention is the fact that Solyndra's application had actually been started by the Bush administration under the Energy Policy Act of 2005.
Regardless of who started it, it was backed whole-heartedly by the Democratic Party all the way up to the big guy himself, who visited the new Fremont plant shortly after it opened and openly praised Solyndra. While Obama was the most visible supporter, he isn't guilty of anything other than maybe being a little too free with taxpayer money. However, a closer look reveals there may have been some inappropriate behavior behind the scenes.
Steve Spinner, an Energy Dept. advisor and former Obama fundraiser recused himself from the federal loan because his wife's firm was affiliated with Solyndra. E-mails have been released that show Spinner remained involved behind the scenes, pushing officials to ensure the loan was approved prior to a scheduled visit where Biden was to visit the Solyndra campus. This all after Spinner pledged in writing not to get involved.
Was Solyndra a Bad Bet From the Get Go?
To be fair, they looked like a good investment at the time the loan was given. They claimed they had billions of dollars in orders waiting to be filled and were backed by some big-time investors, who had provided close to another billion dollars in funding. A billion and a half dollars should have been more than enough to get this start-up off the ground and well on its way to profitability.
So What Happened?
For one, Solyndra overpromised on their ability to create jobs and keep manufacturing local. They set up shop in California; a state not exactly known for being a good place to run a manufacturing business. Then they built a fancy new manufacturing plant at an estimated cost of $733 million. According to an article by Bloomberg, the Solyndra plant had spa-like showers, glass-walled conference rooms and was built to handle a lot more capacity than was actually needed.
Where Solyndra really took a hit was when market forces starting working against them. Competitors were able to take advantage of a plunge in the price of polysillicon, and Chinese manufacturers with lower labor costs began pumping out cheaper alternatives. To top things off, problems at the old plant slowed production down because the old machinery was in a constant state of repair. Couple that with the fact that, according to some insiders, almost half of the panels made were defective and had to be junked and you have a company that is doomed to fail.
It remains to be seen where the cards may fall, but one thing's for sure. If there was any inappropriate use of funds by Solyndra, it's probably going to be caught. The FBI, along with Department of Energy inspectors, raided Solyndra's offices shortly after the solar panel maker filed for bankruptcy. What they were looking for and what they took from the offices isn't clear at this point, but rest assured they're looking for answers.
CEO Brian Harrison stepped down earlier this week after refusing to answer questions from Congress, leading to even more speculation. He's also refused to discuss his salary and his severance package, which is sure to anger the thousand or so employees who got nothing but a pink slip when the plant closed its doors.
From the outside looking in, it isn't immediately obvious anything illegal was taking place, just excessive. The new plant cost over $700 million dollars to build, the company overhired and overbuilt, and they were manufacturing a product that was more expensive to build than what was being offered by the competition. It looks like a business model that was doomed to fail at some point.
Even more unclear is just how hard of a hit taxpayers will have to absorb. If Solyndra is able to restructure and emerge from bankruptcy, it might not be too bad. If they're forced to throw in the towel and liquidate, we could end up on the hook for a pretty good chunk of the half billion, considering there isn't much market for specialized tool and machines to manufacture overpriced solar panels.