Home > posts > WSJ: Fed Loan Ruined Solyndra
September 16th, 2011 3:37 pm
WSJ: Fed Loan Ruined Solyndra

While congressional investigators continue to probe into whether the Obama Administration broke federal laws in awarding a $535 million loan to now-bankrupt Solyndra, the Wall Street Journal details how crony capitalism prolonged a series of bad decisions by the solar company’s management.

Here’s the money paragraph:

In mid-2009, Solyndra had a choice: It could hunker down with its existing factory and try to slash costs to meet competition, drawing on additional private capital as needed, according to the people familiar with the company. Or, with a loan from Uncle Sam, it could gamble and build a brand-new, bigger factory in a bid to gain economies of scale and dominate the market.

Choosing to gamble, Solyndra overbuilt its manufacturing capacity, and continued rushing to market a product that was not marketed – or priced – correctly.

As the WSJ article makes clear, not all of Solyndra’s problems were the result of inept management.  An unexpected drop in the price of a competing product turned Solyndra’s profitability upside down.  The market was sending Solyndra’s management a message to rethink their strategies.  The Obama Administration bypassed that all-important-process with huge amounts of money to continue pursuing failure.

Come to think of it, that pretty much sums up the president’s thinking when it comes to government spending.  No wonder his new jobs plan is dead on arrival.

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