Proterra, an electric bus company, has filed for Chapter 11 bankruptcy, making it the latest company to go belly up in an industry with supply chain constraints and slowing demand. The bankruptcy filing marks a fall from grace for the electric bus and battery producer, which had sold more than 1,300 electric buses to public transit systems in the United States and Canada and received a $1.6 billion valuation in a January 2021 merger with another firm. Proterra listed its assets and liabilities in the range of $500 million to $1 billion and had a market value of $362 million as of a recent close. Earlier this year, the company announced plans for more job cuts and indicated it will combine electric bus and battery production in South Carolina as it looks to trim costs. The Proterra filing comes weeks after Lordstown Motors filed for bankruptcy protection and put itself up for sale after failing to resolve a dispute over a promised investment from Foxconn. Lordstown Motor Corp. builds electric pickup trucks.
According to its press release, Proterra can stay in business while it restructures its obligations. “The company intends to continue to operate in the ordinary course of business as it moves through this process and plans to file the customary motions with the Bankruptcy Court to use existing capital to fund operations, including paying employee salaries and benefits, and compensating vendors and suppliers on a go-forward basis in accordance with Chapter 11 rules, all while ensuring business continuity for customers,” the press release reads. “The foundation we have built has set the stage for decarbonization across the commercial vehicle industry as a whole, and we recognize the great potential in all of our product offerings to enable this important transformation.”
Reports of Poor Performance
The company, however, has had reports of poor performance by its electric buses in cities across the country. In Philadelphia, NPR reported that the city sidelined its expensive Proterra fleet due to structural defects (a defect in the buses’ plastic chassis led to cracking) and poor battery life. In Duluth, Minnesota, Proterra buses were taken off the road because the brakes could not handle the city’s hills due to a software problem causing them to roll back when accelerating uphill from a standstill. In 2020, Charlotte, North Carolina bought five Proterra buses as part of its “sustainability” plan but used them to service the airport rather than full routes through the city, avoiding the problems other cities had with them. Using a grant from Bloomberg Philanthropies and the Federal Transit Administration and others, Charlotte contracted a different company, eTransEnergy, for electric buses to be used around its city. The company is a subsidiary of Duke Power, a major utility in the region.
Harris, Buttigieg and Biden Have Promoted Proterra
Vice President Kamala Harris and Secretary of Transportation Pete Buttigieg plugged Proterra during a trip to Charlotte to promote the administration’s infrastructure spending, which includes money for localities to purchase Proterra’s expensive electric buses. Harris praised the Proterra buses, calling them “very user-friendly” and marveling at how quietly the brakes work. President Biden has also praised Proterra’s products, and administration events have featured the green energy company. In 2021, Biden pledged more than $10 billion from his $1.9 trillion infrastructure plan toward zero-emission transit and school bus programs. Proterra’s investors (e.g. BlackRock) have spoken to and likely influenced top White House officials who crafted the infrastructure deal. In fact, Biden has hired former BlackRock employees for important positions in his administration.
DOE Secretary Granholm Was Invested in Proterra
Granholm had financial positions in Proterra, on whose board she used to sit, and maintained them even as she assumed her post as Secretary of the Department of Energy (DOE) and began to direct policies which could have favored her own financial interests. Granholm eventually closed her position in the firm late in May 2021, after the House Oversight Committee opened an investigation into the apparent conflict of interest earlier in May of 2021. Granholm is alleged to have violated the STOCK Act nine times in 2021. A DOE spokesperson said it was attributable to “an inadvertent clerical oversight.” Granholm netted capital gains amounting to about $1.6 million from the positions she held in Proterra.
EV Makers Tighten Their Belts
Electric-vehicle makers including Stellantis NV and Nikola Corp. are tightening spending as consumers in the United States are concerned with EV affordability. U.S. consumers are worried about rising prices, according to a survey by consulting firm Deloitte. Nearly 7 in 10 prospective EV buyers in the United States expect to pay less than $50,000 for their next vehicle, according to the survey conducted between September and October 2022. The survey also showed that 30 percent of U.S. consumers do not trust anyone with the data from their vehicles, signaling a significant challenge for manufacturers.
In December, Chrysler parent Stellantis said it would indefinitely idle an assembly plant in Belvidere, Illinois, citing high EV costs. The automaker, which employs about 1,350 workers at the Belvidere, Illinois, plant that builds the Jeep Cherokee SUV, said the action will result in indefinite layoffs and added it may not resume operations as it considers other options. They are also reportedly limiting the sale of gasoline vehicles in California and 13 other states who are tightening limits on the vehicles in order to move to EVs.
Lordstown Filed for Bankruptcy Protection
In June, U.S. electric truck manufacturer Lordstown Motors filed for bankruptcy protection and put itself up for sale after failing to resolve a dispute over a promised investment from Taiwan’s Foxconn. In its bankruptcy complaint, Lordstown accused Foxconn of fraudulent conduct and a series of broken promises in failing to abide by an agreement to invest up to $170 million in the electric-vehicle manufacturer. Foxconn previously invested about $52.7 million in Lordstown as part of the agreement, and holds an 8.4 percent stake in the EV maker.
Lordstown’s main product is the Endurance electric pickup truck, which is built at a former General Motors small-car factory in Lordstown, Ohio for commercial customers such as local governments. Under Biden, generous grants are issued to local governments who agree to purchase electric vehicles. Lordstown sold the plant to Foxconn in 2022. Lordstown paused production of the Endurance earlier this year and since April has resumed building the trucks at a low rate after resolving quality issues with suppliers.
Lordstown’s bankruptcy is not the first among EV startups that went public during the pandemic-era boom of special purpose acquisition companies (SPAC boom). Lordstown, however, was a high-profile member of the group because it was challenging the core of the legacy Detroit automakers’ business of high-margin pickup trucks and because of its location.
Conclusion
Proterra, a company promoted by President Biden, VP Harris and DOT Secretary Buttigieg and heavily invested in by DOE Secretary Granholm, was the latest EV manufacturer to file for bankruptcy. The company that sold pricey electric buses had poor performance reviews from a number of U.S. cities. EV manufacturers have found that they need to tighten their belts as U.S. consumers do not want to pay for expensive cars, according to a survey conducted last year, as inflation and rising costs have cut into consumer spending. Unfortunately for EV automakers, prices for critical materials needed for EV production are also going up, making it difficult for them to lower vehicle prices, and the fuel savings touted by their proponents are not standing the test of time as electricity prices increase. The Biden administration is beginning to look a lot like the Obama administration that had bankruptcies in green companies, such as Solyndra and Fisker, costing taxpayers billions.
