Was Solyndra's Fall the Fault of China?

Politics: Trade is a favorite scapegoat whenever jobs are lost. That's why Congress is holding free trade hostage to a porky program that would give more aid to displaced workers. Solyndra's failure shows why it's a bad idea.

IBD's Sean Higgins reported last week that Solyndra, a Fremont, Calif.-based solar panel firm that went bust shortly after taking $527 million in federal loan guarantees, has applied for Trade Adjustment Assistance for 1,100 laid-off workers.

That $1.5 billion federal program is ostensibly for "retraining" for workers who have lost their jobs due to "foreign trade."

In Solyndra's case, that's baloney.

The short story on Solyndra is that its management made a series of bad business decisions while using Uncle Sam's cash to cushion its costly mistakes.

Now that the inevitable has happened and the company is bankrupt, its application for TAA cash ensures all the blame will be laid at competition from the Chinese.

Solyndra isn't some company that got caught off guard by globalization forces like the smokestack industries of yore.

The hipster, modern-green company was unviable from the start.

Acting against the recommendations of auditors and professionals at the Department of Energy, Solyndra won a $527 million federal loan guarantee after White House pressure because it was "green" as well as a fine place for presidential photo ops. A top investor was also a big campaign bundler for the president.

All that cash and political influence couldn't conceal that Solyndra operated on a profoundly flawed business model - that of making solar panels at twice the cost they could be sold at.

According to Senator Orrin Hatch, a Utah Republican, not only was Solyndra outcompeted by the Chinese, it was outcompeted from the start even by its domestic rivals. "The failure was blamed on China, but if you cannot even out-compete U.S. companies, it wasn't foreign competition that ruined your business, it was simply a failed business model," Hatch said.

The company was no victim either.

It entered the market knowing full well that Chinese companies were already in the business and selling the same kinds of panels even more competitively.

Rather than spending its capital to become competitive, Solyndra spent its government cash on a glitzy, glassy headquarters built from scratch even as empty plants stood by. Hayward is near the Silicon Valley, the place where startups often begin in garages.

"The huge NUMMI plant was sitting there empty, so it was strange that this company was building such an elaborate headquarters so close to it," a San Jose local told IBD on a visit last week to the area.

(NUMMI, recall, was the much-ballyhooed GM-Toyota green-car project derailed by union costs last year.)

Which brings us to the ultimate irony. Trade Adjustment Assistance is supposedly for workers in industries that once flourished but can no longer hold their own against globalization, more often than not from China.

"The typical TAA workers is a 46-year-old male with a high-school education who is the primary breadwinner in his family, and who has worked for over a decade in a factory that is closing," a White House press release calling for more such TAA funds says.

Well, no. As Solyndra shows, plant shutdowns often happen for reasons other than competition from China. In some cases, TAA is little more than corporate welfare for businesses that make bad decisions - not aid for workers idled by tough foreign competition.

The shame of this is that free-trade treaties with Colombia, South Korea and Panama are being held up by the White House until Congress approves another $1.5 billion for TAA, a program that encourages workers to blame foreign trade for every layoff, no matter what.

Bailing out Solyndra is the poster child for this.