CODA Automotive filed for bankruptcy this week, reigniting a controversy over whether the City of Los Angeles should have pledged $1 million to lure the electric car-maker
from Santa Monica.
Councilman Eric Garcetti, a candidate for mayor, spearheaded the relocation in 2011, saying it would bring 500 green jobs to the city. But amid lackluster sales and mounting debts, CODA filed for Chapter 11 bankruptcy protection on Wednesday.
"I'll always fight for jobs," Garcetti said this week. "Some of them work and some of them don't."
Garcetti's opponent in the May 21 mayoral election, Wendy Greuel, jumped on the bankruptcy as a sign of Garcetti's failed leadership.
"After years of self-dealing, ethics violations, and record job losses, it's no surprise that another one of Eric Garcetti's pet projects, CODA Automotive, collapsed and is now going bankrupt," said Dave Jacobson, Greuel's spokesman.
The Greuel campaign also faulted Garcetti for taking $8,000 in contributions from CODA executives and their spouses. "This is just another sobering example of the fact that Eric Garcetti is in it for himself," Jacobson said.
Garcetti has close ties to the Angeleno Group, a private equity firm that provided much of CODA's early backing. Garcetti is friends with Zeb Rice, one of its managing partners. Another managing partner, Dan Weiss, is a step-brother of Garcetti's cousins. Garcetti also was once personally invested in the Angeleno Group, though he divested before CODA launched.
Garcetti's campaign defended the decision to offer relocation incentives, saying that the investment created 170 jobs. Garcetti also said that the company is reorganizing and will continue to produce electric vehicle batteries.
"They still have employees that are there today," Garcetti said.
It's hard to dispute, however, that CODA has been a massive disappointment. The company moved to L.A. in 2011, with its headquarters on a street that the City Council renamed Electric Drive. At the time, the company had 100 employees, and projected to grow to more than 600 workers as it ramped up production of the all-electric CODA Sedan.
CODA grew to about 250 employees at its peak, before sluggish demand forced layoffs and furloughs. Today the company has stripped down to just 39 active employees, according to its bankruptcy filing. In other words, the company has suffered a net job loss of 61 employees since moving to L.A.
There seems to be little hope of the city recouping its investment. CODA took $832,000 of the city's promised $1 million. The contract included a provision that requires CODA to repay the money if it moves out of Los Angeles within five years. But CODA's bankruptcy does not trigger that obligation, says Dan Schechter, a professor at Loyola Law School who specializes in bankruptcy.
"The refund term is not gonna fly unless they in fact literally move their headquarters," Schechter says.