Wednesday, September 28, 2011

Solydra Factory: Only the Best for Government Company

Solyndra may be belly up, but at least it goes out with style. Constructed by union workers at a total cost of $733 million (of which proceeds from the government's $535 million loan guarantee was utilized), the Solyndra facility featured robots that sung Disney toons, 19 loading decks, and localized rail lines for moving product across its 300,000 square feet (approximately 5 football fields).

“The new building is like the Taj Mahal,” said John Pierce, 54, a San Jose resident who worked as a facilities manager at Solyndra.

Situated in "Silicon Valley;" which hadn't seen factory construction in 10 years given that its the 4th highest real estate area in the nation (and as such, most developments are simple offices), further frills included professional landscaping for the front, 4 electric car recharge stations, and a glass covered conference room. It even featured a fully equipped spa with state-of-the-art shower displays; to enable employees to relax after the daily grind, comfortable in profitability of their work.

Of course, the problem was that the factory never was worthy of profit to begin with. Despite the lack of prevalent demand for their signature "cylindrical" panel design, in 2009 such modules were touted to the Department of Energy as superior in the cost effectiveness of their construction and installation. This in comparison to traditional flat panels, whose production is currently dominated by Chinese manufacturers.

However, this cost advantage could hold only as long as the price of a primary component for flat panels, polysilicon, remained high. A comparable parallel would be citing a "cost advantage" for electric cars given the premise that oil prices never recede. This was the assumption in 2009, but by the time Solyndra became operational in January of 2011, commodity prices for flat panel components had plunged. Solyndra's claim of cost competitiveness with the conventional design of Chinese flat panels was completely nullified.

Even without the price fallout, hasty construction of the factory left the company with equipment that proved both high maintenance and unreliable.

“A significant percentage of the product we built went into a dumpster because it was defective,” said Craig Ewing, 55, a former maintenance technician. “It seemed like the company accepted that,” he said.

Solyndra executives also neglected to perform a proper cost analysis on their procedures. According to solar industry analyst Peter Lynch, the factory spent $6 per device. To remain competitive, they would have to resale it at $1 to $3 per device. The mass scores of defective product aside, Solyndra's business model wouldn’t even cover half of its costs.

The more we learn about the company, the harder it is to believe that such a waste of taxpayer money could occur. To review, without real demand to prop it up Solyndra's business model laid precariously on a presumption of high commodity prices for competitors. Creating products, many of which didn't even work, Solyndra soon found itself backlogged with overly expensive inventory. Fifteen months of decline later, Solyndra filed for bankruptcy protection on Sept. 6th. 1,100 jobs "created or saved" by Obama's stimulus package went with it.

As for the factory itself, the taxpayer may be stuck with it for the time being, a harrowing reminder for anyone driving down Interstate 880 in Fremont, California.

~David Morris~

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