If you knew of a company that had high manufacturing costs, was in a highly competitive market, and was hemorrhaging money, would you invest in it? Well, the federal government did - using taxpayer money. And now that company, Solyndra LLC, is bankrupt, and the $535 million loan it secured from the government stands little chance of being repaid.
Although the Obama administration has blamed the Solyndra collapse on poor luck and stiff competition from Chinese solar companies, many warning signs were apparent even before the loan guarantee was approved. The evidence includes:
- E-mails between DOE staff members in Aug. 2009 acknowledged that a credit rating agency had predicted Solyndra would run out of money in September 2011.
- Based on securities filings, Solyndra's average sales price for the first nine months of 2009 was $3.24 per watt, while its manufacturing costs were $4 per watt. Worse yet, manufacturing costs for rival First Solar Inc. (Nasdaq: FSLR), which makes silicon-based solar panels, were far lower -- just under $1 per watt (they're now about 75 cents per watt).
- Industry experts had predicted the sharp declines in the cost of silicon as far back as 2008. High-grade silicon was $1,000 per pound in early 2008, but fell to just $100 per pound by September 2009.
- Solyndra lost $172.5 million in 2009 on revenue of $100.5 million. Its cumulative losses at that point totaled $373 million.
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