Well, this is embarrassing for City Councilmen Eric Garcetti and Herb Wesson, along with a list of high-powered investors that includes former Treasury Secretary Hank Paulson and Limited Brands CEO Les Wexner. In various ways, they all bet on Coda Automotive's electric car - Wesson using $1 million of his district's slush fund to entice the company to move to L.A. from Santa Monica (reported in LA Weekly), and investors plunking down more than $200 million on the new business. Early on, the Coda people were talking about selling 10,000 cars in their first year, and I must say their nifty creative space in Santa Monica made a great first impression - as did their mission statement in front of the office: "Our goal is to put an electric car into every garage in the world." Which of course is a lesson to all those contemplating a start up: Ever be humble. As of this month Coda has laid off much of its staff, and there's not enough money in the kitty to pay off suppliers. One of them, UQM Technologies, has written off its contract to supply drive trains because of doubts about being paid; other vendors are in court. The capper is that the automaker's highly visible showroom at Westfield Century City has closed (Tesla will be moving in, according to a sign in the space). Truth is Coda has run out of money because it's barely sold any cars (a few hundred deliveries, according to the stories I've seen). Even in the electric car business Coda is at the bottom of the pack - and that's saying something, given the difficulties that all battery-only manufacturers are facing. Here's a good update from the Economist, and here's what I wrote about Coda in the June 2011 issue of Los Angeles magazine:
Start-ups are always supposed to be ambitious and aim for the new and different (intoxicating words for deep-pocket investors). But breakthrough success requires more--namely a product that offers some added value compared with what's already on the market. Think digital cameras. Think iPhone. Electric vehicles don't do that, at least not now. If anything, they create hassles, starting with the high price (Codas cost $44,900, although federal tax credits are worth up to $7,500), limited driving range (90 to 120 miles), lengthy recharging times (up to six hours), and the dearth of public recharging stations. Plus the Coda isn't exactly stylish, with a generic chassis that resembles Mitsubishi's midsize models. Given all these drawbacks, Coda has plenty of explaining to do--never a great way to sell a product. "How are you going to get a consumer to pay more for a lesser good?" asks Brett Smith, an analyst with the nonprofit Center for Automotive Research in Ann Arbor, Michigan. "The electric vehicle is a significantly lesser good than the internal combustion engine. --At some point the technology has to be economically viable."
I had real doubts about Coda's viability in early 2011, but then again, so did lots of people.(When I asked the CEO at the time of my reporting what his expectations were, there was a long pause and finally he said, "I have absolutely no idea."). I bring this up not to take any credit, but to ask a basic question: Why didn't Garcetti and Wesson get those same bad vibes many months later? Also, why was the $1 million given out without an application from the company or any written analysis from the city? Why did the council unanimously sign off on the payment without debate, according to the Weekly piece? And why was there no provision for repayment in the event that the company did not survive, which is looking more and more likely? Seems that city officials were so desperate to trumpet their efforts at generating jobs - Coda promised more than 600 - that they forgot to look at the P&L statement. Or maybe they don't know how to read a P&L statement. Either way, it doesn't look great.