Solyndra Inc., the high-flying solar panel maker once touted by President Barack Obama as a model for a green energy future, said Wednesday it has scuttled its factory expansion in Fremont, a move that will stop the company's plans to hire 1,000 workers.

Solyndra said it will also close an existing factory in the East Bay. That will leave the company with one Fremont factory, a new plant visible from Interstate 880.

The moves mean that instead of having 2,000 workers in Fremont, Solyndra will cap its work force at 1,000, which is about the current level. Solyndra also will, over the next several weeks, eliminate 155 to 175 jobs in Fremont. That includes 135 contract employees and 20 to 40 full-time workers, said David Miller, a Solyndra spokesman.

The company seeks to slash production costs amid fierce competition from rival manufacturers in China and the United States.

"Solar has become incredibly competitive," Miller said.

The factory retrenchment adds to what has already been a tough year for Solyndra.

"Solyndra is facing the heat," said Shyam Mehta, an analyst with GTM Research, which tracks alternative-energy markets. "Many higher-cost solar manufacturers are doing well. It's alarming for Solyndra to be cutting back when others are expanding."

The company's fortunes sparkled in September 2009, when the Obama administration announced $535 million in taxpayer loans to finance construction of a new solar-equipment factory.


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In December 2009, the company filed for an initial public offering of its stock expected to raise $300 million. In May, Obama toured the Solyndra facilities in Fremont.

The company's fortunes dimmed soon after. In June, Solyndra canceled its IPO, and the following month its chief executive officer, Chris Gronet, quit. Brian Harrison, a former Intel executive, took over as CEO.

"The company's problems raise questions about the federal government's wisdom in giving $535 million to a company with an unproven technology," Mehta said.

Now, Solyndra will close its first factory, known as Fab 1, and shift production equipment to its second factory, Fab 2. The firm won't expand the second factory.

"We will shut down Fab 1 at the end of this year," Miller said. "It will be a shell."

The company expects to control manufacturing costs as a result of these moves.

"Our customers tell us that we have to keep our prices competitive," Miller said. "Our biggest challenge is to lower that cost."

Solyndra, though, is behind its competitors in cutting costs, Mehta said.

Despite these woes, Solyndra could still succeed, the company and analysts said.

For one thing, Solyndra's sales are growing. In 2009, sales totaled $70 million and they are expected to double to $140 million in 2010, Miller said. Sales are projected to grow strongly in 2011, he added. On the other hand, Solyndra has yet to turn a profit. Mehta said Solyndra could still ride its technology to success. The company makes thin-film solar tubes that can capture the sun's rays more efficiently than flat-panel designs.

"Solyndra has a new technology, a new product design," Mehta said. "It has potential. The question is whether the potential reward justifies the risk."

Contact George Avalos at 925-977-8477.