Solyndra – Contradictions and bad business sense

While I usually enjoy reading Instapundit.com, he seems to be unaware of the contradiction on his site. Now I will admit that the Solyndra controversy looks bad, but let’s not make it worse than it is. First we have a link to this article, which claims that the Obama administration reworked the loan to Solyndra to put the non-government investors first in reclaiming any money in the event of bankruptcy or default. Screwing the taxpayers and all.

But within two hours we get another post, this time claiming that the government was in the “first in: line position” after all, and that might have discouraged further investment into Solyndra because investors would be less likely to recoup any investment in the event of failure because the government was first in line.

Which is it? Usually Glenn Reynolds picks up on things like that.

On the other hand, the latter article points out something interesting. Solyndra evidently used the funds to build a huge factory, even though their current factory was more than sufficient to handle the current demand. The second factory seriously increased the fixed costs associated with the product in a case where, from what I understand, they already had negative profit margins. Seems like some irrational exuberance to me.

It’s easy to judge, I suppose, but I have to wonder how they came to the decision to increase production capacity nearly 500% instead of some of the other things they could have done with the money. Did the terms of the loan limit what they could use it for? I can’t help but think it might have been better to start hitting some smaller sales goals before taking such a huge gamble. As a businessman myself, I think I’d have been more conservative.

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Hey, it looks like The Donald is still providing entertainment!