Human Events Blog

Inflatable car manufacturer accuses Obama Administration of crony capitalism

A new company called XP Technology is trying to sue the Energy Department over its loan guarantee program, and the suit contains some serious allegations, as reported by Fox News:

XP has filed four applications with the Energy Department for loans through its Advanced Technology Vehicles Manufacturing (ATVM) program, two in the amounts of $25 million and $45 million that have been denied. Two other applications are still pending. The company says it was given a $1 million grant from a previous Energy Department program to help develop a hydrogen storage system which it has incorporated into its vehicle.

To date, the $25 billion ATVM program has approved just four loan guarantees for Ford, Nissan, Tesla and Fisker, totaling approximately $8.5 billion. XP alleges those awards were the product of a poorly documented process rife with political cronyism and manipulation, and not based purely on merit.

XP manager Scott Douglas Redmond says his company has several witnesses and  more than 5,000 documents to back up its claims that it will reveal during a trial, if one is granted. But he also cites several published reports critical of the administration of the Energy Department’s various loan programs. These include a U.S. House Oversight and Government Reform Committee report issued on Oct. 31, on the Section 1705 program that granted a $535 million loan guarantee to now-bankrupt solar energy company Solyndra, which concluded that “Department of Energy employees felt political pressure from sources as high as the president, vice president, [Energy] Secretary Chu, and senior White House officials.”

(Emphasis mine.)  XP claims that big players are using their connections to starve little companies out of these much-needed grants.  The plucky San Francisco-based startup is about as little as they come; they’ve only got seven employees, and unsuccessfully tried to file their suit in federal court without a lawyer.  (They plan to try again with a lawyer.)

The technology XP is developing involves electric cars with foam bodies mounted on rigid frames, which would cause them to weigh less than half of existing electric cars.  These cars would have replaceable battery packs, making it more convenient to recharge them.  It sounds weird, but existing efforts to build what amount to electric-hybrid versions of traditional compact cars, at fantastic cost and dubious reliability, haven’t been going over terribly well.  Maybe it’s time for the electric-car crowd to admit that the only way to make this technology work, barring some tremendous new futuristic technology, is to settle for jumped-up golf carts.  If they’re cheap and convenient to recharge, they just might sell.

The rest of us shouldn’t be compelled to subsidize any of this tinkering.  These companies should find investors on their own, not drain the wallets of taxpayers.  But XP Technology didn’t start this game – it’s already been played, and we’ve already lost.  It will be interesting to see if the discovery phase of their prospective suit sheds some new light on the “crony capitalist” (or, if you prefer, “venture socialist”) game.  Too bad it didn’t happen before voters authorized another four years of such games.

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