Eric Garcetti at the CODA grand opening
Eric Garcetti at the CODA grand opening

Eric Garcetti's Solyndra: Mayoral Candidate Pushed $1 Million Deal to Lure Troubled Electric-Car Company

On Nov. 10, 2011, Gov. Jerry Brown came to Los Angeles to help open the new headquarters of CODA Automotive. The company was rolling out its CODA Sedan, which boasted new battery technology that would deliver unprecedented range for an all-electric car. The company claimed it would bring 650 high-tech jobs to L.A.


"To the naysayers, we're saying yes to solar, yes to CODA," Brown said. "We're saying yes to a Los Angeles that's on the move."

But though Brown and Mayor Antonio Villaraigosa did most of the talking at the day's ceremony, it was City Council president Eric Garcetti who deserved most of the credit. Garcetti played the key role in enticing CODA to move its headquarters from Santa Monica by dangling $1 million in city redevelopment money -- even as he received $8,000 in contributions from CODA executives and their spouses. 


And yet, a little more than a year later, CODA is in trouble. The company never got close to its goal of 650 employees, topping out at about 270 before it began laying off workers in December. A showroom at the Westfield Century City mall has closed. It appears the company has sold fewer than 100 cars. 

Over the past several months, CODA has been sued by eight suppliers for unpaid bills amounting to more than $1.7 million. One of its suppliers recently warned in an SEC filing of "substantial uncertainty regarding CODA's ability to honor their obligations." 

"Their staff's been cut to nothing," says John Gartner, an analyst at Pike Research. "On the automotive side, it seems like there's not much of a future for them." 

The city's contract calls for CODA to refund its money in full if it moves to another city within five years. But the contract makes no provision for reimbursement if CODA goes bankrupt.

Garcetti is campaigning for mayor on a pledge to bring 20,000 green jobs to Los Angeles. But CODA's woes show how difficult it can be to fulfill such promises. 

It was Garcetti who initiated relocation discussions with CODA. He has a long association with CODA's backers, and once was an investor in Angeleno Group, an L.A. private equity firm that is among CODA's primary investors. (Garcetti had divested well before CODA launched.) 

Garcetti brought the opportunity to the attention of Councilman Herb Wesson, into whose district the company moved. The $1 million grant was made with Wesson's "AB 1290" funds -- which often are criticized as slush funds, since each councilmember has wide latitude on their allotment. In this case, the city gave CODA the money without an application from the company or any written analysis. The council unanimously approved the payment, without debate.

Even if CODA were not faltering, the case would call into question the wisdom of using tax dollars to lure a company away from a neighboring suburb. Santa Monica has a policy against such inducements, and Garcetti himself has described that as a foolish approach to job creation.

"I want to be a mayor not just for the City of Los Angeles, but I want to be a mayor for this entire region," Garcetti said at a debate on Jan. 29. He said he would encourage rapport between local mayors: "So instead of bragging that we stole a business from Glendale or vice versa, which doesn't do anything for somebody looking for a job here -- we didn't net one job -- we can get together and look at how we can compete as a region." 

Asked recently whether the CODA experience was at odds with his statements on regional development, Garcetti says, "Of course it helps our bottom line to have more businesses in the City of L.A. ... Long-term, our strategy should be regional and not just local." 

Garcetti also argued that CODA continues to have a viable battery business: "Most of the stuff they're doing is not cars. It's actually battery technology." 

But Gartner, the analyst, doesn't think much of that. "It's hard to make a case for that being something that's competitive," he says. 

The CODA Sedan, which retails for $38,000, was largely panned in the automotive press, which noted that much of the assembly is done in China, and the design is based on a late-'90s Mitsubishi Lancer. At that price, CODA faces tough competition from the Chevy Volt and the Nissan Leaf. 

Calls and emails to CODA representatives were not returned. Garcetti declined to predict whether the company will stay in business, saying, "You're asking the wrong guy.

"Any undertaking is going to be a risk proposition," he says.

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