Solar Industry Bursts Into Flames

Solar is so over.

The news broke early this morning, and on the other side of the ocean: Germany's No. 3 solar panel maker is bidding to enter the lucrative business of ... car manufacturing. Now, you're going to think I'm making this up, but I assure you that what follows is a true speculative deal Bloomberg reported on (with thanks to CAPS newcomer and solar skeptic Hapoalim Securities for bringing it to my attention):

What's German for chutzpah?
Solarworld AG bid 1 billion euros to buy General Motors' (NYSE: GM  ) Opel manufacturing sites in Germany this morning (even though Opel isn't technically for sale), its bid being conditioned on: Germany itself loaning Solarworld the cash and General Motors paying it all back. In essence, Solarworld wants GM to hand over its German sites for free -- and that ain't gonna happen. But this story is about more than just a lowball bid that GM will certainly reject. If you dig a little deeper, I think you'll agree that it sounds the death knell for the solar industry.

Solar power, green cars -- a match made in heaven?
Sure, on the surface, Solarworld's offer makes sense. Solarworld does solar power -- green energy. It wants to buy Opel to build hybrid and electric (i.e. green) cars. Plus, SW wants all of Opel's property, plant, equipment, and trained workers, for free. Hard to go wrong with terms like these. Worse comes to worst, SW could just turn around and sell Opel for a profit.

Dig a little deeper
And yet, the tenuous logic of the deal aside, the idea as a whole sounds utterly crazy. I mean, solar power is the next big thing, right? Isn't that why Suntech (NYSE: STP  ) and First Solar (Nasdaq: FSLR  ) gained like a billion percent in their first couple years post-IPO? So why would Germany's third biggest solar player diworsify away from this profit monster, and plunge into the (pardon the mixed metaphor) trainwreck that is auto manufacturing?

The answer isn't obvious, but if you think on it a bit, I suspect it will come to you: Solar power ain't what it used to be. Previously considered an industry at the front end of a capital J-curve, we're now beginning to remember that j's can be downgraded into the lower case as well.

And now, Solarworld thinks it can get better returns on its capital by building green Buicks than by manufacturing solar panels. Whether Solarworld is right or wrong about that, it doesn't sound like good news for solar pure-plays like Solarfun (Nasdaq: SOLF  ) or Yingli Green Energy (NYSE: YGE  ) . Sounds to me like just one more reason Fools should adopt a skeptical stance on solar.

Is solar really a flame-out? Take a free trial of Motley Fool Rule Breakers, where we're closely following our sole recommendation in the sector (Suntech), and learn what our experts are thinking.

Fool contributor Rich Smith does not own shares of, nor is he short, any company named above. The Motley Fool's disclosure policy shines bright even on cloudy days.


Read/Post Comments (13) | Recommend This Article (6)

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  • Report this Comment On November 19, 2008, at 4:48 PM, jeturcotte wrote:

    Only difficult I have with all this... given all the fantastic innovations recently, and the pure fact that they allow for this, the most responsible means of acquiring energy, to work better than ever, there should be absolutely no question that solar is going to be a critical part of the future world... simply because it must be. Fossil fuels are finite and potentially world-threatening as well, akin to biofuels which we'll not be able to produce in vast enough quantities to slake our thirst even if they produced no emissions at all... windmills have moving parts, which doth mean potential market in their maintenance however... and hydro and geothermal will be around for a long time, but cannot increase at the same pace that civilization does (whereas solar can)... and finally, there is also a limited amount of nuclear fuel out there, and its use is dangerous and centralized (making it, like most plants, a potential point of attack for all sorts of ne'er-do-wells) whereas solar can be ubiquitous and distributed.

    Whether the current companies are doing it right or not (that's a question of good business that DOES influence securities trading, sure), the future will be rather dark without solar power, regardless of the financials involved.

  • Report this Comment On November 19, 2008, at 6:14 PM, skylooker1 wrote:

    So SW wants to buy Opel, using none of their own capital. How does that even suggest that they want to exit, or downsize, their solar panel manufacturing business? Perhaps they want to add some of their solar products to automobiles. To say "Solar is so over." is incredibly stupid, especially at a time when solar is just starting to become a cost effective energy solution.

  • Report this Comment On November 19, 2008, at 7:08 PM, 8cents wrote:

    "Solar power ain't what it used to be. " ? Isn't it more ahead of its time still? It never was anything. Maybe you mean solar stocks aren't what they used to be but in the coming 4 years I would predict an upswing in solar.

  • Report this Comment On November 19, 2008, at 7:19 PM, grouchley wrote:

    OK this comment is aimed at the FOOLS more than the solar industry.

    I have noticed the FOOLS negative stance on solars for quite a while now so I write this to you.

    Your foolish site loves to quote the same over and over, Had you invested $10k in AOL you'd have $161,478 now. $10k in Amazon would be $176,167. $10k in Intuitive Surgical would already be $31,517. blah blah blah

    Tell me an industry that isn't down or a FOOL stock recomendation that is up since september and maybe I would have some respect for you stupid FOOLS.

    Solar is down and that means that the industry is dead.

    DAWSON IS DOWN

    POTASH IS DOWN

    APPLE IS DOWN

    MICRSOFT

    RIO

    BHP

    ETC ETC ETC

    So with your FOOLISH article and your FOOLISH analysis

    all these industries are dead too.

    WRITE SOMETHING EDUCATIONAL OR EVEN MAYBE INFORMATIVE.

  • Report this Comment On November 19, 2008, at 9:48 PM, MyDonkey wrote:

    Solar is just getting started. The thing that's over is Oil.

    Extreme price volatility (like we've seen this year) is one of the signs of Peak Oil, and if it hasn't already peaked, even the optimistic folks figure we'll be there within 20 years.

    http://www.mnforsustain.org/oil_peaking_of_world_oil_product...

    By then, America could be enjoying some form of Solar Grand Plan

    http://www.sciam.com/article.cfm?id=a-solar-grand-plan

    Smart money knows that Solar is the future. But first we have to short the stocks and verbally bash the industry to drive the price down, so we can jump in at the bottom and ride the Solar rocket to riches.

  • Report this Comment On November 20, 2008, at 2:40 AM, armchare wrote:

    Admittedly Solarworld's offer to buy Opel does not make a lot of sense to me. However, Solarworld is not about to stop making solar panels and start making green (electric) cars.

    There are other companies who are getting into the electric vehicles like BYD Auto, a manufactuer of such products as lithium ion batteries. But aside from that to single out solar stocks demise may perhaps be somewhat premature.

    There are many reasons to still have faith in solar power and other renewable energy sources: greater energy independance from imports, decreasing oil and non-renewable fuel sources, climate change in relation to human activity, and the list goes on.

    Like so many other stocks, solar has dimmed in the short term but will shine once again.

  • Report this Comment On November 20, 2008, at 7:45 AM, dockofthebay wrote:

    Solar energy will be dead when the sun itself dies. At that time, this planet will be dead. My bet is that the sun outlasts the planet's oil and natural gas supply.

    In the meanwhile, the solar energy industry is getting incrementally closer to grid parity. Not all solar companies will make it to that day. However, those which are well financed, put money and effort into R&D and have a reputation for work well done will be stronger than ever after a shakeout of the weaker companies.

  • Report this Comment On November 20, 2008, at 9:55 AM, Madoff283 wrote:

    This is a horrible article.

  • Report this Comment On November 20, 2008, at 10:55 AM, Loser2Master wrote:

    Most stupid article I have read for days. When it is a bear market even the fools assume they are right and this article is a perfect illustration of it.

    I will certainly come back and make mockery of this article in 9-12 months.

  • Report this Comment On November 21, 2008, at 6:32 AM, rookie02 wrote:

    Unfortunately it appears that just because you dont understand why they are making this move does not mean that they are running from Solar or trying to change a manufacture to save a fallen solar empire.... it could actually show signs of a strengthening company looking to diversify. the offer itself certainly shows some business smarts. why offer anything more than you are certain they will reject?

    I believe in solar.... and as this market falls with the rest i am jumping in.

    when the dust settles i will be ahead.

  • Report this Comment On November 21, 2008, at 8:33 PM, testarosa wrote:

    As far as i remember Motley fool had only one purpose:To confuse the readers.In last few months if they wrote 10 articles about Solar industries 5 was for them and 5 condeming them.Recomending FSLR or YGE in one and next week kick the hell out of them.Give the 5 star to FSLR or YGE one week and then like this article:THE END OF SOLAR.i am not particularly interested in their articles which is bunch of garbage but cant help it when you see it in your stock news.It is realy hard to find out the real purpose of the writers of these articles or even prove them but i`d not be surprised if mr GEKKO had something to do with it.

  • Report this Comment On November 29, 2008, at 3:13 PM, geogene wrote:

    I have 40 years experience working in alternative (green) energy. Anyone who believes the solar power hype must also believe in the tooth fairy. The environmental/politically active crowd are filled with people lacking even a rudimentary knowledge of science and engineering. That is why time after time they embrace expensive impractical solutions that don't work or worse cause more problems than they solve. There are several sensible ways to make on demand reliable electric power with less of an environmental impact than hydrocarbon fuel, but solar is not one of those solutions. The baby boomer crowd and their offspring love solar, I guess because they grew up believing in the liberal propaganda they were taught. The solutions that do work rarely get funded or mentioned, it is always just solar, the least practical alternative. At least solar will be a welfare system for clueless PhD's. Too bad for America that we are a nation of people seeking easy solutions that are going to instantly make everything better. Solar is going to be a bigger boondoggle than is ethanol.

  • Report this Comment On December 15, 2008, at 5:09 PM, madman420 wrote:

    We really are fools aren't we...? For one to say "I'll have the last laugh" is more hilarious than the actual act. Have we forgotten what investing is truly about? Solar power (in my opinion) is THE power for the future. Whether or not it actually turns out that way is another story; that of the stock market.

    I, personally, don't think of the stock market as a national gambling association. As a matter of fact I hate capitalism. I invest in companies that have a strong plan for things I am interested in (like the environment). If we collectively look for companies that have a real plan for our interests as well as a firm stance in a competitive market - we can, as a group, support these ideas with capital so that they can prosper and in the long run lead to wealth for all of us; even those who don't invest (clean air = priceless).

    Blindly buying up shares of a company that makes claims of a solar future is beyond foolish. As we can see in the above article, some may even switch directions completely (who knows maybe Solarworld thinks their industry is dead and wants to switch to fossil related?). Make an educated investment in what you believe in and you will benefit everyone, not just yourself.

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