A lesson in the federal government picking winners and supply and demand

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This is the future, Barack Obama and the federal government says so!

How did it all go so wrong?

How in the world could solar panel prices “collapse”?

Apr 17, 4:40 PM EDT

First Solar lays off 2,000 as Europe demand wanes

NEW YORK (AP) -- First Solar Inc. will lay off 2,000 workers and close its factory in Germany following a collapse in solar panel prices that has erased the industry's profits and forced some smaller companies into bankruptcy.

America's biggest solar manufacturer said the layoffs amount to 30 percent of its global workforce. It's an about-face for a company that doubled the number of employees at the Frankfurt, Germany, plant to more than 1,200 just last year. First Solar will also shutter some production in Malaysia. It plans additional job cuts in Europe and the U.S.

"The solar market has changed, and so must we," Mark Widmar, First Solar's chief financial officer, told analysts in a conference call.

The price of solar panels, which generate electricity from sunlight, has plummeted recently. An influx of Chinese competitors has led to a rapid buildup in supply. At the same time governments in Europe, the biggest market for solar power, are reducing generous subsidy programs that had fueled demand. From March to December last year, solar panel prices dropped 50 percent, said Aaron Chew, an analyst with the Maxim Group.

Cheaper solar is good news for consumers, but manufacturers are struggling to stay afloat. Last year, Solyndra LLC of Fremont, Calif., Evergreen Solar Inc. of Marlboro, Mass., and Spectrawatt Inc. of Hopewell Junction, N.Y. all declared bankruptcy.

"Nobody's making money in this business right now," Chew said.

Analysts said job cuts, factory closures and even mergers are to be expected in a relatively young industry that still welcomes new players every year. They see the industry following in the footsteps of television and computer makers by locating factories in Asia, where labor costs are low and governments provide few regulatory obstacles.

"It's a very healthy thing," Jefferies & Co. analyst Jesse Pichel said. "This is a shakeout period for solar in which uncompetitive technologies are getting kicked out."

First Solar specializes in "thin film" solar modules that are cheaper than those made by competitors. But the decline in global panel prices has eroded its status as the industry's low-cost leader. First Solar's modules are also less efficient than others, limiting their use. For instance, they're ideal for large-scale projects that deliver power to the electrical grid, but they less effective for smaller systems used on rooftops.

The company lost $39.5 million in 2011 after earning $664.2 million in 2010. Its shares have dropped nearly 85 percent in the past 12 months. They rose about 10.3 percent Tuesday to $22.96 after the company announced the cuts.

"It is essential that we reduce production and decrease expenses," First Solar Chairman and CEO Mike Ahearn in a statement. "These actions will enable us to focus our resources on developing the markets where we expect to generate significant growth in coming years," such as the U.S. and China.

First Solar expects the restructuring to reduce its manufacturing costs by $30-$60 million this year and another $100-$120 million a year afterward. It will book a charge of $245 to $370 million, mostly in its first-quarter results.

Analysts said First Solar needs to cut costs even more and demonstrate that its panels are as durable as its competitors. Pichel said that

as prices continue to fall, consumers will likely favor more efficient, polysilicon panels made by other solar companies. Goldman Sachs analyst Brian Lee downgraded First Solar to "Neutral" from "Buy" and cut 2014 earnings expectations to $4 from $5.75 per share.

Meanwhile, sales of solar panels and related equipment should keep rising, but nowhere near the blistering pace of the past several years. Solar installations are expected to increase by 3.7 percent this year, compared with a 49.7 percent increase from 2010 to 2011, according to energy research group GTM Research.

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It's hat damn “supply and demand” thing getting in the way again.

So let me get this straight … cheap foreign product (subsidized by the Chinese government) flooded the market created by government subsidized demand, driving up supply while lowering the price. Meanwhile the false demand that had been supported by “generous [government] subsidy programs” ended (thus ending the “demand”). Consequently there is no demand for the current over supply and no one is buying the stuff?

Wow, just wow,,,,,,,,,,,,,,,,who could have seen that coming?

And the current producer can’t make a profit and thus has to lay off people?

Hope and Change