Taxpayer-Backed Electric Car Company Closes U.S. Factory

Government watchdog recommends DOE wind down controversial program

President Barack Obama tours Smith Electric Vehicles in Kansas City, Mo. / AP
April 9, 2014

Critics of Democrats calling for additional subsidies for electric vehicles are pointing to the financial troubles of one stimulus-backed car producer that just announced it is closing its U.S. plant.

Missouri-based Smith Electric Vehicles said this week that it is suspending operations in the United States due to a "tight cash-flow situation."

Its financial troubles came despite nearly $30 million in funds from the Department of Energy (DOE) granted to the company through President Barack Obama’s 2009 stimulus package.

"You’re setting a model for what we need to be across this country," Obama said when he visited Smith’s Kansas City production facilities in 2010.

"You’re doing more than just building new vehicles," Obama said. "You are helping to fight our way through a vicious recession and you are building the economy of America’s future."

The DOE grant was supposed to support the construction of 510 electric vehicles for municipal public transportation. The company had put 439 vehicles in service by the end of 2013, according to, using $29,150,672 in taxpayer funds.

The White House claimed that the project would create "more than 220 direct and indirect jobs," but Smith only reported the creation of the hourly equivalent of 70.35 jobs—meaning DOE spent an average of about $414,000 per job created.

The company said last year that it employed 131 people in the United States.

It will now shutter its Kansas City plant, CEO Bryan Hansel said on Monday. Smith will continue to operate in Europe and Asia, where it has additional production facilities.

"We didn’t see value in continuing to build a small number of vehicles at the price point we were," said Hansel, who noted that despite federal support the company was manufacturing vehicles at a loss.

Smith has been struggling for some time. It reported annual losses in the millions after receiving DOE funds.

Smith’s announcement this week came only days after Energy Secretary Ernest Moniz announced his intention to restart a controversial electric vehicle subsidy program that has already backed a number of failed companies.

The Advanced Technology Vehicle Manufacturing (ATVM) program "plays a crucial role in supporting the growth of the U.S. auto manufacturing industry," DOE said in a statement last week.

The program has about $16 billion in authorized funds it has yet to disburse.

Prior grantees have included luxury electric vehicle manufacturer Fisker Automotive and battery manufacturer A123 Systems, both of which went bankrupt after receiving DOE funds.

Moniz expressed confidence that the electric vehicle market has improved since those high-profile failures.

"The U.S. auto industry has evolved since the ATVM Program was established and today we are presented with an opportunity to hit the accelerator on U.S. auto manufacturing growth," he said.

However, critics of the program say Smith’s financial troubles illustrate the continued folly of taxpayer support for electric vehicles.

"The recent announcement of yet another failed stimulus project is a reminder of how the Obama administration has gambled taxpayer dollars on risky green energy projects," said Sen. John Thune (R., S.D.) in an emailed statement.

He pointed to a Tuesday report from the Government Accountability Office (GAO) recommending that the program be scrapped.

"Congress should follow [GAO’s] advice before the administration makes any new taxpayer-backed loans through this program," Thune said.

GAO’s report recommended that Congress rescind "all or part of the remaining credit subsidy appropriations to the [ATVM] loan program, unless the [DOE] can demonstrate sufficient demand for new ATVM loans and viable applications."

Even as criticism of the ATVM program grows, congressional Democrats are offering legislation to continue subsidizing the electric vehicle market.

Legislation introduced by Rep. Zoe Lofgren (D., Calif.) would authorize the Treasury Department to issue up to $50 billion in federal bonds to finance, among other efforts, $2,500 government vouchers for Americans to purchase plug-in hybrid electric cars.