This time, the federal government lost $42 million on a loan to a Michigan-based manufacturer of natural-gas-powered vans for the disabled, called Vehicle Production Group (at least we can be pretty sure they didn’t use any federal funds on branding). VPG stopped operations in February, and last week, the federal government sold its note, which had an original balance of $50 million, to AM General, the company that builds Hummers and Humvees, for $3 million — after the company had managed to pay back $5 million worth of the loan, the federal fisc’s loss adds up to $42 million. AM General says it will continue building the vans at its Indiana factory.
VPG’s loan was part of a Department of Energy loan program begun under the Bush administration to encourage the development of alternative-fuel vehicles, which also funded the development of Fisker, a luxury electric-car company that’s run into financial trouble. (Solyndra, meanwhile, was the beneficiary of a different loan-guarantee program, an Obama-era stimulus program also for green-energy projects.) Despite a number of prominent failures of green-energy firms backed by the government, the program isn’t actually plagued by abnormally high default rates and has cost taxpayers less than expected. But, as Veronique de Rugy has pointed out, there are plenty of other reasons why the loan programs as implemented represent poor economic policy: They have often gone to large, established firms or firms that could find capital easily elsewhere (but may well have bountiful government connections), so they’re really just rent-seeking, and any benefits derived from their innovations and successes could well have come from private-sector investment without any cost to taxpayers at all.