Solyndra Lawsuit: War of the Solar Dead Solyndra

Doug Young
October 17, 2012 | 7 Comments

The fight for survival among the world's embattled solar panel makers is starting to look more like a battle of the dead, with word that bankrupt US player Solyndra is suing 3 of its biggest Chinese rivals over allegations of running an illegal cartel. Some of you might be saying: "Wait a minute, doesn't Solyndra have better things to do than to be filing lawsuits against rivals who are also flirting with bankruptcy?" If that's the question, then the answer appears to be "no". Perhaps the failed Solyndra is still seeking some final respect, and also perhaps some money through a quick settlement of this lawsuit to repay a long list of creditors that includes the US government.

Solar energy historians will recall that Solyndra's bankruptcy filing in August 2011 was the event that sparked a US anti-dumping probe against Chinese solar panel makers over allegations of unfair state-support through policies like low-interest loans and export rebates. That investigation resulted in the announcement of large punitive tariffs against Chinese solar panel makers just last week, with the actual tariffs set to take effect by the end of the year.

In this latest wrinkle to the story, Solyndra has filed its lawsuit in California against a number of Chinese solar firms, including sector leaders Suntech (NYSE: STP), Trina (NYSE: TSL) and Yingli (NYSE: YGE). The lawsuit claims the Chinese firms schemed with each other to flood the US market by selling panels there at prices that were below costs. If that was there intention, then the Chinese firms certainly succeeded spectacularly, so much so that the entire market is now going through its worst-ever crisis as prices have plunged to unsustainably low levels due to a massive supply glut.

Yingli and Trina both issued statements over the weekend denying the allegations and saying they would defend themselves vigorously in the case. Personally speaking I think the claims in this lawsuit do seem hard to believe, as Chinese solar cell makers are an extremely competitive group don't seem organized or willing enough to work together for the kind of collusion that the lawsuit describes.

That doesn't mean that the bigger claims of unfair state support aren't true, as I also do believe that all of the Chinese firms get big backing from both Beijing as well as their local governments. That support will most likely continue in the months ahead, with word that China Development Bank, a Beijing-based policy lender, is busy working on a rescue package for about a dozen of the industry's top players.

What's more likely with the Solyndra case is that the US company is in the process of liquidating its assets to pay off creditors, and perhaps hopes it can get a quick settlement from the Chinese companies to earn just a little more money to make those repayments. Readers may recall that one of those creditors just happens to be the US government, which guaranteed a $535 million loan for Solyndra.

But to return to my original metaphor about a battle of the dead, this new lawsuit does seem like an ominous development for a group of companies already fighting for survival amid a downturn that is showing few signs of easing. Suntech, once considered an industry pioneer and sector leader, recently received an emergency $32 million government loan just to keep its operations going for the next few months; and I'm sure that Trina and Yingli are probably facing similar cash crunches.

I could easily see other US and European solar panel makers like First Solar (Nasdaq: FSLR) and Solar World (Frankfurt: SWV) filing similar lawsuits, and the cash-starved Chinese companies could even start to attack each other if they thought such tactics could improve their own chances for survival. If and when that happens, look for the inevitable consolidation among global solar panel makers to turn quite ugly, pitting a group of zombies against one another as each battles to be the last one still walking.

Bottom line: A lawsuit by Solyndra against Chinese solar panel makers could be the start of a wave of litigation within the sector as players battle for survival.

This blog was originally published on Young's China Business Blog and was republished with permission.

Lead image: Lawsuit via Shutterstock

The information and views expressed in this blog post are solely those of the author and not necessarily those of RenewableEnergyWorld.com or the companies that advertise on this Web site and other publications. This blog was posted directly by the author and was not reviewed for accuracy, spelling or grammar.

7 Comments

Thomas M
October 24, 2012

To bad these comapanies cannot work together for the good of the planet rather than fighting each other over money. Just goes to show that we as the human race are still in our infantcy.

ANONYMOUS
October 23, 2012

The lawyers are the ONLY winners...again.

Steve Yang, P.E.
October 20, 2012

Well, there is a winner, or two--the DOE SunShot program's goal of seeing $1/watt has been accelerated and reached. Also, the American consumers benefited from the Chinese subsidized products, or generally compressed prices of competing solar modules.

Paul Passarelli
October 18, 2012

Romney, was doing OK until he fell over to the Left again. China isn't "cheating" -- China is "competing", and they are competing *very* effectively. We have an emotional need to call it cheating because the Chinese choose to sacrifice their environment, people, human rights, etc., and we in the West find that repulsive.

Economics is called the "dismal science" for a reason.

According to economic theory there are two types of goods:

1) Commodities that are relatively undifferentiated, e.g. coal, oil, wheat, rice, etc.

2) Luxuries that command a higher price because of quality, prestige, exclusivity, etc. These are also known as "value added" or premiums.

For commodities there is an inevitable "race to the bottom", and *any* intervention in that race, is ultimately paid for by everyone in the form of a higher than optimal market price; even though isolated pockets benefit from localized intervention i.e tariffs. On the global stage, the result is that everyone suffers.

The American people won't accept the dumping of Chinese panels is a business decision! We don't like it, because we will suffer in the short term, and believe that we are being exploited. It is our attitude that is taking the beating. China cannot, China will not dump commodities forever, eventually their cost of production will rise, or our costs will fall and the market will find a new equilibrium.

What can I say to comfort the assembly-line person who loses their job to Chinese competition? I don't know. I can say you are a victim of three generations of poor political decisions by American politicians. That would be the truth. I could add that you should have paid better attention in math & science class when you were a child. And you parents should have pushed you harder; but that's only rubbing salt in the wound.

We have to get off out collective butts, and innovate! I can't tell folks how to do that; "Necessity is the mother of invention!"

Calvin Verdun
October 18, 2012

Solyndra might be on to something, if you watched the presidential debate, you know Republican party Gov Romney spoke about China doing under-handed tactics to flood the market with discounted products. Hopefully we get a resolution to this problem.

Paul Passarelli
October 18, 2012

This is the story that never ends, yes it goes on and on my friends, some people started telling it not knowing what it was, and they'll go on retelling it forever just because... {return to top}

Solyndra was destined to fail, because the technology was flawed. We should crucify the government bureaucrats that approved the loans as an example to other bureaucrats... You will be held accountable!

first last
October 18, 2012

Solyndra's lawsuit should theoretically backfire horribly. The simple fact is the company blasted through a US government guaranteed USD 550 million loan within 12 months. An absolutely obscene and ludicrous financial gamble in an extremely volatile market, already engaged in aggressive price wars. Solyndra's legal activities are an attempt to point the popular finger at China for all its woes as opposed to acknowledging it's own incompetent, negligent, and potentially criminal (that kind of cavalier, arrogant stupidity should be criminal) management. Solyndra gambled heavily with US taxpayer money and lost. No sane, responsible construction company would construct a USD 550 million project without solid contractual revenues and solid demand in the pipeline. Solyndra's lawsuit can only reveal some of the massive US industrial frauds in this market sector and in Solyndra's case - we the US taxpayers are once again the losers. While I continue to applaud President Obama's focus on the renewable energy industry - the USA should have learned from its own contemporary history that throwing money without responsible accountability and controls is not a sustainable solution. I'm assuming Solyndra will rely on anti-China political rhetoric to win its case. It used political influence to seal its USD 550 million taxpayer backed loan (with no strings attached - what a fantastic deal) - however within the discovery process - lots of Solyndra's dirty laundry will become public knowledge - unless Solyndra has already destroyed all that condemning evidence. This will be an interesting brawl.

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Doug Young

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters, writing about publicly listed Chinese companies. He currently lives in Shanghai where he teaches financial journalism at a leading local university....