Officials say deal shields taxpayer

• By GARY PERILLOUX
• Advocate business writer
• Published: Jun 19, 2009 - Page: 1A

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In committing $69 million to a fledgling automaker in Monroe, state officials said contingency clauses in the deal announced Wednesday with San Diego-based V-Vehicle Co. will protect the Louisiana taxpayer investment.

Among the protections, Louisiana won’t release $55 million of its commitment until VVC raises $350 million in private capital and financing. Much of that money could come by the fall from a Department of Energy advanced technology vehicles manufacturing loan.

“The company has raised about $100 million to date in private equity capital,” said Stephen Moret, the state’s economic development secretary, who said the federal low-interest loan amount targeted by VVC is about $250 million.

The investors — who include Silicon Valley venture capitalists Ray Lane and John Doerr, oil and gas billionaire T. Boone Pickens and Ruston trucking and oil transport executive James Davison — could raise more private equity and debt, “but the ATVM (federal loan) would be the fastest and most straightforward path forward,” Moret said.

VVC expects to break ground later this year, expand the former Guide Corp. headlamp plant in Monroe by 76 percent to 750,000 square feet and begin hiring the first of a projected 1,400 workers in mid-2010. The plant could open in late 2010, with commercial production of a yet-to-be-disclosed, fuel-efficient car in early 2011.

Davison bought the Guide Corp. plant after it closed in 2007 and will lease the property at a rate to be negotiated, according to a cooperative endeavor agreement released Thursday by the state Department of Economic Development. In a worst-case scenario of VVC failure, Louisiana could buy back the facility for roughly $6 million and benefit from the $87 million in improvements by marketing it to other manufacturers, Moret said.

In a brief interview Thursday, Davison said his holding company originally envisioned other plans for the Guide plant, but he quickly became impressed by the principals in VVC.

“I think this is the best thing for our state — I’m real impressed with the deal,” he said, shortly before breaking off the interview to address a shipping business matter. “They’re good, good people. I’ve liked them from day one.”

Though details about the product remain proprietary, Davison said the business model focuses squarely on a less expensive, more efficient way to build cars. And a state-commissioned study by a Dallas analyst concurred that VVC has a “compelling business model, and targets economics that are reasonable and achievable.”

That opinion came in a June 12 summary of VVC’s potential by automotive management consultant Brian Irwin. His firm, A.T. Kearney, began a $635,000 study last year of the potential for drawing automotive prospects to Louisiana and for retaining General Motors operations in Shreveport — before the nature of the VVC project was known, Moret said.

Later, Irwin and Kearney had “carte blanche” access to all business plans and strategies of the VVC venture and their conclusions represent the best judgment about the Monroe plant’s potential, Moret said. The VVC project then was known as Project Liberty.

“Project Liberty’s distribution strategy is compelling,” Irwin wrote in a letter distributed to members of the Joint Legislative Committee on the Budget, who’ll likely meet next week to sign off on releasing the state’s $69 million — over time — from a state megafund for projects that create 500 jobs or invest $500 million. “All things considered, we believe Liberty can achieve sales volumes in excess of their break-even requirements and certainly at a level that will support production at the contemplated facility.”

How many models VVC would produce annually hasn’t been disclosed by the company. But Moret said an early version of the car already has been in state and that more details will become known in the next six to nine months as the project evolves.