KSLA News 12 Investigation: Elio could face fines with further production delays

Published: Feb. 5, 2015 at 8:37 PM CST
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CADDO PARISH, LA (KSLA) - Elio Motors announced in 2013, they'd be building their 3 wheeled vehicles at the old GM plant in Shreveport. Since then, the company has become known for announcing production delays and Thursday they announced yet another delay.

The company will not be unveiling their new engine Feb. 6, as it was announced at the beginning of January. According to Elio spokesman Mike DeVilling, the company is rescheduling the event and the date is "to be announced."

But in an email sent to reservation holders just two days before the event was to take place, a little more information is provided as to why the event was postponed. "We are rescheduling the date for the official engine unveiling originally scheduled for Feb. 6 due to several key stakeholders having immovable scheduling conflicts," the email read. "We are currently working with the key partners and the facility to quickly confirm a new date and will advise you accordingly."

This, coupled with several production delays has many wanting to know exactly where Elio Motors really is. The latest production delay was announced January 15 by Paul Elio himself in Caddo Parish.Now, with the most recent postponement of the engine unveiling, some are wondering if the 3-wheeled cars will ever roll off the production line. Others remain supportive of the concept, enough to put up cold, hard cash in order to be among the first in line for one of the vehicles.

Mark Muenzmaier of Texarkana, Arkansas was at the meeting where Elio announced the delay. He is part of a community of nearly 40,000 who have paid anywhere from $100 to $1000 to reserve one of the vehicles. Muenzmaier put down $1000 non-refundable dollars to be number 602 in line.

"I googled it, found them, they said they were taking reservations, put in my card, done," said Deborah McAteer of Marshall, Texas, who reserved her Elio in early 2013. She is number 18 in line to get her vehicle once they are produced.

"It will change personal transportation for America period," said McAteer, who is a loyal supporter of the company, with the unwavering belief that Elio Motors will be a success."It feels important, possibly I can play a part in something that has the potential to help the country," said McAteer.

She, like countless others, hope to get a job at the Shreveport plant to help build the auto cycles."I'll do whatever they want me to do, whatever I can do, I just want to be a part of making it happen," said McAteer.

However, those jobs are not yet available. Production for the vehicle was pushed back from 2014 to 2015 and most recently delayed to the first half of 2016, still a year away. "With the delays over the past year or 18 months, it does burst the reservation holders bubble a little bit," said Muenzmaier.

So what's with the delay? KSLA News 12 went straight to Elio Motors CEO Paul Elio for answers. "I've predicted wrong on a couple of things and that is where the delays are," Elio explained.

Looking at the past three years, Elio's predicted production start dates never stayed the same for long. "It turns out my crystal ball is cracked, I did not predict well," Elio admitted. He says the reason they can't start building the cars boils down to funding and lack of it.

Elio Motors needs $300 million total to start production. They've only raised $65 million so far. That means they need $240 million more to even get started.

However, Elio tells KSLA News 12 that he does have a plan to get the money. According to Elio, the company will rely on a professional fundraising company to attract investors and they have hired another company to sell off surplus equipment purchased from the old GM plant."So now it's a race, the fast of the two, sell enough equipment or get an investor in place, that sets up the rest of the timeline," said Elio.

Elio has also applied for a $185 million Department of Energy loan. They've made it through the first of three steps, but all that means is the company has qualified for the loan.The second step involves the government looking at the project inside and out. The third step is essentially for those who make it past the second step, where they cross the t's and dot the i's.

Dawn Selak, a spokesman with the Department of Energy, won't tell us how long any of the steps would take and wouldn't comment on Elio Motors' application.

Selak did give some insight on the application process, however. "The Department and the Advanced Technology Vehicles Manufacturing loan program are committed to ensuring that the resurgence of the American automotive industry continues," Selak said. "To date, the ATVM program has supported the production of over 4 million cars and approximately 35,000 direct jobs across eight states, and we look forward to supporting the next generation of advanced vehicles."

But even if Elio Motors does secure the loan, we're told the DOE won't cut a check for the full amount right away. That money will only be given to Elio in small increments as the company reaches different milestones.

Ken Epperson is one of 11 Caddo Commissioners who voted to pave the way for Elio Motors to set up shop in the parish. KSLA News 12 asked Epperson if he was aware when he first voted to help Elio Motors that the company didn't have enough funding to get production started.

"The deal was to work with Stuart Lichter and Elio Motors, and Industrial Development Board, my hands are washed of it," said Epperson.

Epperson's vote meant $7.5 million in taxpayer money was given to the Industrial Development Board to buy the old GM plant, the plant was then leased to the Industrial Realty Group, which would sublease part of the plant to Elio Motors. Epperson says he has no control over what happens next.

"Hey, that's their ball game now. I'm confident, otherwise I wouldn't have voted for it, if I didn't think it would happen," said Epperson.

But several reservation holders aren't so confident, sharing their concerns on social media, "We really do want this to happen, but unfortunately given the current model, given the current events, it's very hard to remain optimistic at this point," said reservation holder Joseph Canale.

Elio has promised to bring 1,500 well paying jobs to the area. RACER Trust is holding the CEO to his promise. RACER Trust owned the plant after GM's bankruptcy, then sold the plant to Caddo Parish's Industrial Development Board.

As part of the deal, RACER Trust created an agreement with Paul Elio to employee 1,500 people.

"We actually guaranteed with a financial penalty, the number of jobs," said Elio.

The February 1, 2015 deadline to create those jobs has passed and so has several of Elio Motor's projected start dates.

But RACER Trust redevelopment manager Bruce Rasher says Elio won't be penalized because they are working on an extension.

"We have not formally granted the extension yet, we are still in discussions with Elio, but we fully intend to agree on changes in our contract to extend the date, to mid-2016," said Rasher.

"Obviously we've made significant progress, it's not like we have been idle, so they are like we'll give you a little wiggle room on the date, not on the jobs," said Elio.

Rasher wouldn't tell us exactly what the financial penalties would be, if Elio breaks the agreement. But we uncovered meeting minutes from an August 2013 Economic Development Committee meeting that documents Rasher telling Caddo Commissioners if the jobs were not created by the deadline, Elio would have to pay a penalty of $5 thousand dollars per job not created, that adds up to $7.5 million.

But we wanted to know how many extensions Elio will be allowed, before the company faces fines. Rasher didn't give us a concrete answer.

"I can't talk about hypothetical events in the future at this time," said Rasher.

With the time constraints, some people who have put money down to reserve an Elio car don't believe the vehicles will make their job creation deadline. Joseph Canale is one of them,"Not too many people with actual business experience like myself, would ever think such a large feat would be possible."

Though some are still holding out hope, Muenzmaier admits the delays aren't ideal, but says he doesn't have a problem waiting.

"If the delays are not too far in the future, that's ok because we do want a good car coming off the line here," Muenzmaier said.

As for McAteer, she says delays should be expected with a project as big as what Elio Motors is trying to do.

"The deadline is not here, there is nothing that will indicate, that its not going to happen, until there is, I'm not going to assume that, why would I?" she said.

Whether you're a doubter or believer, reservation holders agree, the idea of the three wheeled car has created what some describe as a community.

"This project really matters, that's why I think we have such an engaged fan base," said Elio.

That "fan" base is watching not only Elio's successes, but also the company's setbacks very closely.

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