Industries to Watch: Solar

As predicted in a 2011 Business Credit magazine article, the United States’ solar energy industry has taken its share of lumps over the last two years, but there are still those purporting the massive potential that solar holds. Whether true or not, there are real and continuing risks for everyone involved in the industry, and the government budget fight and “sequester” only adds a whole new dimension to potential problems, especially for survivors of the first wave of domestic solar-related bankruptcies.

U.S. product manufacturers are contending with what they see as unfair assistance to competing solar manufacturing sectors in Asia by their governments, especially that of China. The U.S. placed tariffs on Chinese imports, but the measures were seen as somewhat weak and coupled with evidence that some Chinese firms are simply off-shoring operations to areas like Singapore where such tariffs aren’t in play. In addition, the glut of U.S. producers left over from the cheap lending days of the financial boom of the late-2000s caused an industry saturation that became a real problem when demand fell during lower growth years. The two issues led to several high-profile bankruptcy filings headlined by that of Solyndra, which had ties to key Obama Administration fundraisers investigated for widespread fraud and reaping huge amounts in government grants.

Michael Joncich, manager of the business insolvency department for NACM affiliate Credit Management Association for NACM affiliate Credit Management Association, was among those who predicted the problems in 2011. He now speculates that reduced federal subsidies, grants and other assistance aren’t likely to help current matters. “Government can make or break an industry. I don’t really know if the shakeout is done yet,” he said.

Joncich noted that a colleague in the liquidation business recently learned everything he could about green businesses, thinking it was a bubble ready to pop, especially once it became apparent that the government was retracting its “generous funding” of those industries, including solar. “The observation is that they can’t seem to fund themselves,” he said. “When the government pulls back because of federal budget cutbacks, many can’t survive it,” he said.

It doesn’t mean all solar manufacturers are doomed, but there are enough red flags that virtually all creditors dealing with customers related to the solar industry should be paying close attention to them, their accounts and their terms.

- Brian Shappell, CBA, NACM staff writer

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