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May 30

Wave of future drains tax dollars, job hopes









What is known, however, is that the Obama and Bush administrations poured millions of dollars into battery production in a quest to power thousands of Think City vehicles with lithium-ion batteries. To date, Ener1, parent of the battery firm, has spent $55 million in federal funding, according to the U.S. Department of Energy.




"When you're talking about creating whole new industries -- and that's where tomorrow's jobs will come from -- there's going to be lots of high risk," she said. "There is a role for government, but you have to careful of how that's done."

Charging up Elkhart



The person who may have the most to say about Think's future also isn't talking. Russian investor Boris Zingarevich, founder of Ilim Group, one of Russia's largest timber companies, bought Norwegian parent firm Think Global at auction a month after its bankruptcy. He has since renamed it Electric Mobility Solutions.

Reached by phone in Russia, Slava Bychkov, a spokesman for Ilim Group, said he could not provide details of the car company's future.

"The management is now under the restart process and will communicate their strategy in (the) near future," Bychkov said.

The situation is a far cry from what was envisioned in 2009: a bustling plant building cars that would be part of the American dream of a gasoline-free future. Every level of government, from the city to the state to the federal government, bought into the dream by pledging millions of dollars in incentives and tax breaks to Think, which promised to build those cars.

Over the next two years, Indiana's Daniels announced deals across the state that he said would bring electric vehicle-related employment: 1,600 jobs in Elkhart County for hybrid pickup trucks, 300 jobs in central Indiana for plug-in hybrid work trucks. The truck ventures have yet to get off the ground. Ener1, the battery supplier to Think, with three locations in Indiana, envisioned creating 1,400 jobs; Think was supposed to create 415 jobs in Indiana.

Vice President Joe Biden seized on the excitement surrounding Think, posing a year ago beside a car to promote the battery company. He heralded the battery-maker as one of "100 Recovery Act projects changing America," putting people back to work and helping transform the economy.

President Barack Obama swooped into Elkhart three times, turning the battered city into a poster child for an economy in need of government intervention. Unemployment had topped 20 percent as the recreational vehicle industry, which during its peak employed as many as 50,000 people in Elkhart County, had nose-dived and failed to recover. That Think City had set up shop in a massive building where RV windows and doors were once manufactured was seen as a sign of rebirth.

Everyone involved apparently became so jazzed about jobs that they didn't spend much time thinking about who would buy Think cars.

"I would get knots in my stomach. What are we going to do? Your heart ached because you knew how hungry they were for jobs," said Dorinda Heiden-Guss, president of the Economic Development Corp. of Elkhart County.

Barkley Garrett, Elkhart's economic development director, said, "You have to look at it in the context of dealing with almost 20 percent unemployment. When you have one out of every five people in your community out of work, every job looks like a good job.''

Moreover, Think City fit neatly into Elkhart's goal of attracting technology companies, Garrett said. It seemed to make sense. "The diversification was great. The number of jobs, the amount of investment," he added.

Recalls trip Think

Think City was to have 415 workers by 2013. By the end of 2011 it was projected to produce 2,500 vehicles with the potential to build 60,000 cars a year.

The concept worked like this: The first cars were produced in Europe then shipped to Elkhart, where seat belts and headlights would be replaced to meet U.S. standards. Ultimately, the entire car was to be produced in the Midwest.

Think's future looked bright in December 2010. Daniels proudly accepted the first 15 Think vehicles at a press conference at Fort Harrison State Park in Indianapolis. The cars were to be used by the state's Department of Natural Resources, thanks to federal tax incentives and a $5 million grant from the federal government.

But it didn't take long for things to unravel. The vehicle launched in the U.S. at the end of 2010 with a sticker price of $41,695, about $8,000 above Think's previously announced target price. As a result, sales were a fraction of what had been projected. At its height Think City's plant only employed 25 people. And most of the 200 or so vehicles Think City sold in the U.S. were to government fleets, sweetened by subsidies.

Recalls added to Think's woes. The first, in January 2011, was related to improperly installed seat belts. A month later a recall involved defective defroster systems. Finally, the National Highway Traffic Safety Administration determined that the car had a tendency to slip out of park.

The recalls occurred just as a $5 million loan from battery partner Ener1 was coming due. When Think couldn't pay, Ener1 lent an additional $10 million to keep the car company afloat because it needed a buyer for its batteries.

In May 2011, Ener1 wrote off its $73 million stake in Think. The following month, Think Global filed for bankruptcy in Norway, listing $32 million it owed Ener1.

The bankruptcy marked Think's fourth trip through bankruptcy court, and the ramifications for Ener1 were profound. The recipient of a $118.5 million U.S. Department of Energy grant saw its shares tumble to pennies and its shares delisted from the Nasdaq stock exchange. Shareholders sued, claiming management had not flagged the severity of Think's financial woes when they decided to invest in the battery-maker.

New bankruptcy

On Thursday, Ener1 filed for bankruptcy in New York. About 275 Indiana employees are expected to continue with the company as it restructures through a prepackaged bankruptcy, the Energy Department said.

A spokeswoman for Daniels said the governor was not available for comment.

The company will receive $81 million in private capital, Energy Department spokeswoman Jen Stutsman said. That investment "demonstrates that the (battery) technology has merit."

For now, a plan to invest $237 million in an Ener1 facility in Hancock County, east of Indianapolis -- expected to produce enough batteries for 60,000 electric cars -- is on hold.

Brian Sinderson, a spokesman for the battery company, said Ener1 plans to continue to provide batteries to customers in the electric grid, transportation and industrial markets. It also intends to fulfill its commitment to create jobs. In its most recent report as a recipient of the Recovery Act, Ener1 had spent $55 million of its 50-50 cost-sharing grant.

With the bankruptcies of the battery-maker and Think, the future of both will be determined in Russia.

Zingarevich, who filings show owns 47.3 percent of shares in Ener1, signed a memorandum of understanding with Ener1 to cooperate in relaunching Think.

Ener1 filed for Chapter 11 bankruptcy protection with about $91 million in debt outstanding. The firm is asking a judge to sign off on a prepackaged deal that would cut the debt in half and repay current noteholders with new equity in a reorganized company.

Of the $81 million in new capital, Zingarevich would be solely responsible for $50 million, which includes a $20 million post-petition credit line. He and a group of noteholders would team up to provide the remaining $31 million, and he would end up a large holder of preferred stock in the company.

Zingarevich, said in July that a new version of the automobile would launch in the first quarter of this year.

Michael Lew, an analyst for New York-based Needham and Co. who has followed Ener1 and Think, said no one is clear on the future of the two companies.

"There's always hope," he said. "But you need to know what exactly the plan is."


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