You never like to see a company close its doors – and you certainly don’t want to see 100 people lose their jobs – as happened with the demise of Vehicle Production Group. But can anyone have failed to see this coming? It’s the latest example of what happens when government, in all its business wisdom, decides to anoint a certain kind of industry as destined for success.
Vehicle Production Group made a wheelchair-accessible MV-1 vehicles that ran on compressed natural gas. Nothing wrong with that if there is demand for the product. Was there?
Well, the first sign that there wasn’t was that the company needed a $50 million loan from the Department of Energy to get off the ground. Companies that make a quality product for which there is demand can generally secure their own financing.
So sure, we all know the growing list of stories about companies who got DOE loans (Solyndra, Fisker) who ended up going under. But maybe VPG would be different. Maybe there was really a burgeoning demand for wheelchair-accessible MV-1s that run on compressed natural gas.
It’s not the craziest thing I’ve ever heard. I’ve heard Andy Kaufman routines.
But uh oh . . . danger sign number two: An awful lot of the orders came from . . . government. That’s a big red flag. When government desperately wants a product to penetrate the market but it’s just not happening, government not only subsidizes the product, government buys the product. Often in large quantities.
But OK, at least VPG had orders! That’s something, right? It’s better than nothing.
Actually it turned out to be worse than nothing, because state and local governments ordered the vehicles, but then couldn’t take delivery on them because they ran out of cash to pay for them.
Oh well.
The Department of Energy has stepped back and taken a hard look at the $25 billion loan program, properly known as the Advanced Technology Vehicle Manufacturing program, and has determined that it might not be such a good idea to keep making the loans given the track record of the companies it’s been supporting to date.
Remember the theory about how all these alternative technologies were going to create gobs and gobs of jobs, but there was just the small problem of no one being willing to capitalize them . . . so, government to the rescue?
The $25B that was taxed from the private sector and loaned out to companies who ended up in bankruptcy could have been left in the private sector, where it could have been used to create products people actually wanted to buy, and thus create jobs for people who might have been able to hang onto them for awhile. But no. The DOE had to lend the money to companies who would agree to make products politicians wanted to see, and then when no one else would order the products, politicians would order them – but not pay for them.
It’s hard to believe we still have so much unemployment with a government that has business sense like this.
