by James A. Bacon
I have renewed confidence in the judgment of the professionals at the Virginia Economic Development Partnership (VEDP). According to emails uncovered by an Associated Press through a Freedom of Information Act (FOIA) request, they evinced skepticism of an electric-vehicle manufacturing project pitched by Terry McAuliffe, chairman of GreenTech Automotive.
The golden-tongued McAuliffe was one of the most successful political fund-raisers in U.S. history when he served as former chairman of the Democratic National Committee and now is a presumed favorite for the Democratic Party of Virginia nomination for governor next year. In 2009 he was shopping around for a location to build a manufacturing plant for the company’s two-seater electric vehicles. Not only would production of the vehicles lead to the creation of thousands of direct and indirect jobs, the company claimed, the U.S.-based operation would contribute to a positive balance of trade by exporting much of its production to Europe and China.
One might have thought that McAuliffe had an “in” with Virginia, where then-Governor Tim Kaine had assumed the mantle as chairman of the Democratic National Committee. It’s a credit to Kaine that he did not intervene — or, at least, there is no insinuation that he did — to get McAuliffe any special treatment. Reports the Associated Press:
From the start, GreenTech officials urged Virginia officials — including Kaine — to implement the program. Just as quickly, VEDP officials became wary.
“This company is a complete start-up venture and it appears the management team has no previous experience in automotive manufacturing,” VEDP’s Mike Lehmkuhler wrote in a Sept. 10 email to Patrick Gottschalk, then Kaine’s secretary of commerce.
In October, GreenTech announced plans for a plant in Tunica County, Miss., best known for its nine casino resorts about half an hour south of Memphis, Tenn. That surprised VEDP officials who had scheduled site visits the next two days for GreenTech executives near Waverly, Danville and Martinsville, a city with persistent double-digit unemployment rates.
Later in October 2009, Lehmkuhler wrote in an email to GreenTech executive Gary Tang that after a second review of the company’s business plan, “we still do not see a unique value proposition that explains how GreenTech will reach forecasted sales.” He noted GreenTech lacked brand recognition; had not demonstrated vehicle performance; had no federal safety and fuel-economy certification; no emissions approval from the Environmental Protection Agency; no distribution network; and “no demonstrated automotive industry experience within the executive management team.”
In the heavily redacted email, Lehmkuhler noted market dominance by high-mileage hybrid cars from established automakers such as Toyota, Honda, Ford and Nissan, and pressed Tang about the competitiveness of its MyCar vehicle, the efficiency of its production models and its financial backing.
McAuliffe chose Mississippi over Virginia for an investment — amounting to $1 billion between GreenTech and its suppliers — because, in his words, “No one else’s offer was even close to [Mississippi] Governor Barbour’s. We can disagree on political issues, but this is two people from two different parties coming together. He’s been very aggressive in bringing in the carmakers, so now he’s saying, ‘Let’s try an electric.’ It’s a win-win for everybody.”
Bacon’s bottom line: I have often questioned Virginia’s use of tax incentives and other subsidies to close corporate-investment deals. In a recent post, however, I noted that Virginia’s incentives are modest compared to those of many other states. Now the revelations of the GreenTech episode suggests that VEDP is discriminating about the projects it takes on as well. It builds confidence to know that McAuliffe’s political connections won him no favors in the Old Dominion.
GreenTech Automotive will be an interesting company to watch. The company claims that the stylish little MyCar EV will be able to run 115 miles on a charge and will carry a price of $15,500. The car will have a top speed of 45 miles per hour, however, limiting it to urban markets. The automotive press is dubious that the business model is viable.
In 2011 Automotive News declared McAuliffe’s plan “dead on arrival.” It took GM nearly 2,000 engineers to to support its various hybrid and electric-vehicle initiatives. GreenTech has 50 engineers. GM may have bloated overhead but GreenTech may be severely under-powered.
Earlier this year Hybrid Cars noted that the cars would be restricted in the U.S. to roads with 35 mph speed limits and that they pose major safety concerns. “The odds appear to be considerably stacked against GreenTech succeeding as a significant vehicle manufacturer in the long term.” On the other hand, GreenTech is targeting the export market. McAuliffe has lined up a Danish distributor and forged a joint-venture partnership in China.
If the enterprise flops, it will tar McAuliffe as a fast-talker with big ideas and poor business judgment whose main gift is talking other people out of their money. He would be the last guy I’d want as governor overseeing Virginia’s economic development projects. On the other hand, if he pulls it off, he will gain enormous credibility as a big thinker and deal maker. Let’s hope that the business prospects for GreenTech will be sufficiently clear by next year that we can make an informed judgment of McAuliffe’s gubernatorial timber.
