Shortly after Roger Saillant took over as CEO of ailing Plug Power, in early 2001, he arranged for an “investor day” at the Albany, NY, company, which today makes hydrogen fuel cells aimed primarily at providing backup power for telecommunications and other businesses with networks in remote locations.
Hydrogen fuel cells provide heat and electricity from hydrogen stored in fitted tanks, doing so with minimal emissions of water and heat. The cells employ membranes that divide hydrogen atoms into protons and electrons. While the electrons travel around the membranes, generating direct current power, the protons pass through the membrane, combining with oxygen to produce heat and water without combustion emissions.
On that investor day back in 2001, Plug Power was in bad shape. Begun in 1997 as a joint venture between Mechanical Technology Inc. and DTE Energy Co. of Detroit, the company’s ambitious goal was create fuel cells for powering homes and businesses. While the initial prices were going to be high – $175,000 per unit – the company saw a future in which miniature units would cost about $5,000 apiece. Although the technology was still evolving at the time of its IPO in October 1999, under chairman George McNamee and CEO Gary Mittleman, Plug declared that homeowners coast to coast would line up for the hydrogen-powered fueling devices. It even boasted to investors and analysts that it had a customer and joint partner, GE Power Systems, poised to buy 485 units. There was giddiness among its 500 employees.
By spring 2000, however, the startup was failing to meet its specifications for the size and power output of the hydrogen cells, and was forced to release General Electric from its contract. Word of the failure spread through the industry – and customers disappeared. By August, CEO Mittleman had resigned, and he and other principals were accused by shareholders in a November 2000 lawsuit of overhyping the stock and dumping shares just before the GE deal went awry. (The suit was settled in May 2004.)
By the end of fiscal 2000, Plug’s net loss was more than $85 million, and it had laid off 90 employees (its workforce would bottom out at 250, before rising to 300 in 2005). Plug had burned through more than $200 million in startup capital and watched its inflated stock price plummet from a stratospheric $157 per share to $9 in less than six months.
So what was new CEO Saillant to do?
“I had people bring in a huge stone,” he recalled, “I stood on it and told investors and staff, ‘I’m going to bring you bedrock.’ I told them we would not and could not get hydrogen fuel cells into the mass market, because the technology was not there. I was treated like an idiot for a while. My investor-relations guy said he stood next to a guy that day who immediately got out his cell phone and said, ‘Sell Plug now.’ But my motivation was a simple commitment to truth. Investors need to know what the truth is.”