Solar market competition forces panel maker Solyndra into cutbacks, layoffs

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Solar panel maker Solyndra, confronted with stiff price competition, will make drastic cuts in its operations that include shuttering an older plant and layoffs. The company also will delay expansion of a new state-of-the-art factory that had the government's blessings in the form of a $535 million DOE loan guarantee, the first such Recovery Act DOE guarantee awarded. An article in the New York Times says Solyndra's dramatic cost-cutting maneuver indicates a change in future prospects for American solar producers because of serious price competition from China where manufacturers typically use more conventional technologies than the advanced (but slightly less efficient) technologies like Solyndra's proprietary thin film panels. According to the Oakland Tribune, the company's move to stomp on the brakes means that instead of having 2,000 employees at its Fremont, California, operations, it will have no more than 1,000. The article said the company will cut 155 to 175 jobs over the weeks to come.

Warning signs were there

Just last month, Solyndra announced a new, easy to install, low-cost commercial rooftop and the completion of its largest solar installation in Germany with more such projects to come. The company was held up as a shiny symbol of a sustainable energy future when its loan guarantee was announced in September 2009. The storm clouds took a while to gather, but gather they did. Solyndra had filed for an initial public offering of its stock in December 2009, but cancelled it in June — and in July CEO Chris Gronet quit. The latest move has attracted some pretty harsh criticism for the way Solyndra does business and the government's decision to give it a loan guarantee. Comments from Shyam Mehta, a GTM Research analyst, quoted in the Tribune article, sum up both points. "Solyndra is facing the heat. Many higher-cost solar manufacturers are doing well. It's alarming for Solyndra to be cutting back when others are expanding," he said. "The company's problems raise questions about the federal government's wisdom in giving $535 million to a company with an unproven technology," he added. That said, Solyndra's current CEO, Brian Harrison, said it may re-open the older plant or continue its expansion plans depending on what happens with the market.

Quick Take: Of course it's bad news for Solyndra and for the renewable energy technology industry overall. It's also a valuable smart grid lesson: Innovation and money don't guarantee success or even survival in a globally competitive market.

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