Solyndra Successful and Innovative?

Context is key to any discussion about failed solar energy company Solyndra.

Mitt Romney's campaign was quick to slam President Barack Obama's team Wednesday for a claim that Solyndra was once considered a successful and innovative business."There was nothing 'innovative' about giving political payoffs to campaign donors. There was nothing 'successful' about 1,800 workers losing their jobs or taxpayers losing hundreds of millions of dollars," Ryan Williams, a Romney spokesman, said Wednesday in a statement.Williams was referencing the comment from an Obama spokeswoman, who told The Detroit News that Solyndra was widely praised before and after it received a $535 million loan guarantee from the Department of Energy. "In fact, both Republican and Democratic administrations advanced Solyndra's application, and the company was widely praised as successful and innovative both before and after receiving the Department of Energy loan guarantee," Lis Smith, an Obama spokeswoman told The Detroit News.Romney has used Solyndra as a key criticism of the president, and has pointed to its failure as a case of cronyism -- George Kaiser, a top Obama bundler, was a primary venture capital investor in the company. Several Capitol Hill investigations have failed to turn up any "smoking gun" of cronyism in the Solyndra loan process.References to success may be a matter of semantics when it comes to Solyndra. The solar cell manufacturer never managed to turn a profit, however, it is typical of early stage companies operating at low production levels in new technology sectors to generate negative gross margins for the first several years as production is scaled. However, the Obama spokeswoman's comment about the company's success obscures the fact that Obama's Department of Energy continued to lend to Solyndra during a period of time when it was clear the company's viability was uncertain. In fact, the primary rational for the last round of funding providing by the government to Solyndra was that if it ever came to a bankruptcy, the government would in theory be able to recoup more of its loan if Solyndra's facilities were built out to full scale, as opposed to trying to auction off a half-built, bankrupt operation. This venture capital theory -- supported by outside advisers to the Department of Energy -- has not proven to be relevant to the Solyndra bankruptcy process, which has failed to uncover any buyers willing to pay up for the company's manufacturing facilities. In addition to the government loan, Solyndra was the largest loss in the history of the venture capital industry.The now-defunct Solyndra did manufacture solar panels that were deemed an innovative product by solar installers in key markets, including Europe, using a cylindrical tube as opposed to flat solar panel design.Former President George W. Bush created the government loan program that eventually funded Solyndra. The government created the program to promote "innovative technologies."MIT Technology Review and The Wall Street Journal tagged Solyndra in 2010 as a "50 Most Innovative Companies in the World" and "Top 10 Venture-backed Clean-Tech Companies," respectively.Solyndra's major flaw -- and the blind side of the government in supporting the company -- was the failure to recognize that the solar market was moving rapidly in the direction of lowest-cost, commoditized solar panels, as opposed to higher efficiency premium panels. As Chinese low-cost solar manufacturing ramped to a scale that created overcapacity in the global solar market, premium manufacturers like Solyndra were unable to bring a compelling business case to the market. It has yet to be determined whether the Solyndra scuffle will affect the broader electorate's voting behavior in November.Additional reporting by Eric Rosenbaum Follow @JoeDeaux>To order reprints of this article, click here: Reprints