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Cars, Candidates, Loans, and Bailouts

Discussion in 'Electric Vehicles' started by vfx, Aug 25, 2008.

  1. malcolm

    malcolm Active Member

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  2. dpeilow

    dpeilow Moderator

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  3. graham

    graham Active Member

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    With all the reports I have seen about a "bail-out" and Tesla's role in it, there seems to be a common misconception that Tesla is asking to be "bailed out" along with the 3 other auto manufacturers. Many news reports and blogs show incredulity that little Tesla needs to be bailed out like the other manufacturers. Tesla doesn't employ enough workers to save many jobs, and they only make a tiny handful of cars for the rich. Why should they get any money?

    These arguments are wrong in a couple of ways:

    1) The big 3 have asked for $50 billion. $25 billion of that is truly a bail-out - a tax payer gift to keep them out of bankruptcy. The other $25 billion is low interest credit supposedly to retool their factories to build more energy efficient cars.

    Tesla is not asking for to be "bailed out" - just access to the credit during a time where large loans are difficult to come by.

    2) Little Tesla employs too few workers and makes too few cars appealing to too few citizens to make it worthy of extending it government credit.

    If the purpose of the $25 billion in credit is the same as the $25 billion bail-out - that is: the automotive industry is really big, and for that reason alone letting it go under is bad for the economy - then yes, Tesla has no place in that. But if the purpose of the credit is to make more efficient cars available in the U.S., Tesla should easily have a crack at it.

    Tesla has asked for $400 million dollars for "2 projects" - One has to be "Model S", and the other is probably either "Blue Star" or their drive train business. Either of which would more quickly and directly raise the efficiency of the U.S. fleet than anything the other auto manufacturers can do in the immediate future.

    With $400 million (a very tiny piece of the $25 billion), Tesla could begin Blue Star in parallel with Model S. Or work more to supply other manufacturers with an electric drive train.

    And this is all money in a loan, not as a gift. Tesla has just as good a chance of paying it back as any of the other manufacturers at this point, and would make a quicker, bigger dent in upgrading the U.S. fleet of cars.
     
  4. dpeilow

    dpeilow Moderator

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  5. vfx

    vfx Well-Known Member

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    But wait, Can someone do a direct dollar to employee job loss number for each company?
     
  6. vfx

    vfx Well-Known Member

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    I thought this argument made a good case for the small car companies like Tesla, Pheonix, Zap etc...

    From Seth Godin:
    I was in Detroit last week... I have family there. I also drive a car. And I would rather that the world doesn't melt and the economy thrive. So I'm uniquely qualified to weigh in on the automobile industry.
    Not only should Congress encourage/facilitate the organized bankruptcy of the Big Three, but it should also make it easy for them to be replaced by 500 new car companies.
    Or perhaps a thousand.
    That's how many car companies there were 90 years ago.
    That's right, when all the innovation hit the car industry, there were thousands of car companies, with hundreds running at any one time. From Wikipedia:
    Throughout this era, development of automotive technology was rapid, due in part to a huge number (hundreds) of small manufacturers all competing to gain the world's attention. Key developments included electric ignition (by Robert Bosch, 1903), independent suspension, and four-wheel brakes (by the Arrol-Johnston Company of Scotland in 1909).[16] Leaf springs were widely used for suspension, though many other systems were still in use, with angle steel taking over from armored wood as the frame material of choice. Transmissions and throttle controls were widely adopted, allowing a variety of cruising speeds, though vehicles generally still had discrete speed settings rather than the infinitely variable system familiar in cars of later eras.
    Between 1907 and 1912, the high-wheel motor buggy (resembling the horse buggy of before 1900) was in its heyday, with over seventy-five makers including Holsman (Chicago), IHC (Chicago), and Sears (which sold via catalog); the high-wheeler would be killed by the Model T.
    Back in its heyday, Ford Motor made every single part of its cars, including raising the sheep that grew the wool that made the fabric that upholstered the seats. That's not true any more. Now, suppliers make just about every part. We need those suppliers, and we need them to stay healthy.
    What we don't need are giant companies with limited choice, confused priorities, private jets and a bully's attitude.
    I'd spend a billion dollars to make the creation of a car company turnkey. Make it easy to get all the safety and regulatory approvals... as easy to start a car company as it is to start a web company. Use the bankruptcy to wipe out the hated, legacy marketing portion of the industry: the dealers.
    We'd end up with a rational number of "car stores" in every city that sold lots of brands. We'd have super cheap cars and super efficient cars and super weird cars. There'd be an orgy of innovation, and from that, a whole new energy and approach would evolve. Betcha.
     
  7. WarpedOne

    WarpedOne Supreme Premier

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    This man deserves a beer. Very rational approach.
     
  8. Bradleybang

    Bradleybang Member

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    Well said. I'll buy round 2.

    Giving these 3 more money to avoid bankrupcy will NOT create a viable industry. They will as they have done for the past 20 years spend the money on their own and UAW payroll first and R&D + product second.

    Giving Big 3 money will not make the public buy their product. The American public has already voted on this with their wallets.

    Those who say " oh but we gave money to the banks". This is true but we Americans actually buy their products.

    Also, the banks seem to change or go away when not providing a viable product.

    Citibank fired 30k people last week, they did not guaranty those employees 3 years at 90% of payroll.

    Wachovia failed and Wells took over for pennies. The entire executive staff except one was terminated.

    This is what needs to go on in the big 3 and can only be done in bankrupcy. Bankrupcy should put out to bid sales of divisions. All employment contracts destroyed (corporate and UAW).
     
  9. Chris H.

    Chris H. Member

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    Just a suggestion, but I think we should stop referring to GM, Ford, and Chrysler as "the Big Three", as, relative to their industry peers, they are anything but big. I would suggest calling them the Detroit Three, or even D3 if you prefer abbreviations.
     
  10. dpeilow

    dpeilow Moderator

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    The Capitalist

     
  11. graham

    graham Active Member

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    #52 graham, Nov 27, 2008
    Last edited by a moderator: Dec 4, 2008
    Tesla's take:
    Tesla Motors - Message to Washington: Don’t turn a good government program into a bailout

    Moderator's Note: c.f. http://www.teslamotorsclub.com/news-articles-events/1927-tesla-message-about-detroit-3-bailout.html
     
  12. vfx

    vfx Well-Known Member

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  13. dpeilow

    dpeilow Moderator

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  14. DisneylandIsHome

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    Another Hatchet Job


    Sadly Jon Oltsik is guilty of perpetuating previously reported lies about Tesla. He should know better.

    Tesla is not in trouble or requesting money from the $25B auto industry bailout. Tesla applied for a loan through the Advanced Technology Vehicle Manufacturing Initiative Program which was created by the December 2007 Energy Independence and Security Act. This program provides loans and grants to automakers to encourage development and delivery of next-generation cars -- vehicles that meet higher standards for fuel efficiency and stretch technology beyond the internal combustion engine. The program is aimed to provide “grants and loans to eligible automobile makers and component suppliers for projects that re-equip, expand, and establish manufacturing facilities in the U.S. to produce light-duty vehicles and components that make meaningful improvements in fuel economy performance.” That is what Tesla is about.
     
  15. vfx

    vfx Well-Known Member

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    Gm-usa

    Dan Neil has some pretty cool thoughts:

    *******
    Nationalize GM - Los Angeles Times

    OPINION
    Nationalize GM
    The federal government should buy GM. We can run it, then sell it at a profit once it recovers.
    By Dan Neil December 2, 2008

    At the moment, D.C. and Detroit are brooding on a Morton's Fork: Watch the American automakers auger in and take hundreds of thousands of jobs with them, or bail out these failed and incorrigible companies whose management so richly deserves whatever hell (flying coach?) awaits them.

    Tops on the critics' list of grievances is Detroit's failure to anticipate the inevitable. Why didn't these companies sufficiently invest in next-generation technology -- fuel-efficient small cars, high-mileage hybrids, plug-ins and all-electric vehicles -- that could help wean the U.S. off foreign oil and take the automobile out of the climate-change equation? As the auto executives again bring their begging bowl to Congress, a consensus is forming: No bailout unless Detroit builds greener cars.

    From my perch, as someone who drives all of the Big Three's North American product offerings, I think a lot of the anger is reflexive and misplaced. Detroit makes some amazing cars, and anyone who thinks otherwise should hold a Corvette ZR1 to his head and pull the trigger. The Ford F-150 pickup I drove last week flat-out humbles rivals from Toyota or Nissan. Considering that the domestic carmakers are shouldering titanic "legacy" costs -- it's estimated that $2,000 in healthcare, pension and employee post-retirement benefits are baked into the price of every UAW-built vehicle -- just being competitive in any segment is a signal achievement.

    Nonetheless, the question remains: What to do about the domestic automakers? My modest proposal: Nationalize GM.

    To be clear, I mean that the federal government should buy GM; forget rathole loans or nonvoting equity shares. The company's stockholder value has been essentially wiped out. The company's enterprise value -- the lock, stock and forklift price -- is about $32 billion; its total debt is $45 billion. Let's make GM an offer.

    If you feel the gall of free-market ideology rising, consider that the measures being bruited about as preconditions for a bailout -- firing GM's top management; forcing a bankruptcy-like renegotiation of contracts with the UAW, suppliers and dealers (it has too many); and creating a czar of product development to force the building of green cars -- are nationalization in all but name. I say embrace it. GM-USA.

    Here are the benefits of nationalization:

    GM's fundamental problem is that it's too big -- and expecting it to fix itself in exchange for a $10-billion to $15-billion loan (its share of the vaunted $25-billion bailout) or magically right-size in Chapter 11 is foolhardy. It would take too long, cost too much and bankruptcy, should it come, would send customers running for the hills. Time is of the essence. Congress, writing a GM law and using federal power to abrogate contracts, could achieve at least some of these goals at a stroke.

    GM is full of talent and potential. The company spent $8.1 billion on research and development last year, second only to Toyota. Of all the carmakers, GM is closest to commercializing a full-size, four-door, plug-in electric vehicle, the Volt, due in the fourth quarter of 2010. The Volt should travel about 40 miles in all-electric mode before requiring the services of its onboard, gas-powered generator. Many owners could go weeks before they used any gasoline. This is precisely the sort of car that environmental and energy security advocates have been clamoring for.

    GM's business is growing in other parts of the world; it's only the North American operations that are killing the company. This is a corporation that had $181 billion in revenue and sold 9.4 million vehicles in 2007. To put it another way: GM, though distressed, looks like a good investment. Also, the federal government can sell the company -- at a profit -- once it's righted and sailing forward again.

    GM is competing with companies that are quasi-national now. If you consider the advantages the government of Japan has bestowed on Toyota, Nissan and Honda -- in terms of healthcare and retirement benefits for its employees -- the unevenness of the field is clear. The same goes for most European companies, and the rising rivals in China will enjoy similar state-subsidized advantages.

    The government can afford long-term planning. Many of GM's strategic missteps -- such as betting large on trucks and SUVs and not investing early in hybrid technology -- were the result of willful shortsightedness at the board level, responding to a financial market in which shareholders look for the quick return. Putting Uncle Sam in charge would fundamentally enlarge the return-on-investment horizon.

    We need government-sized automotive help anyway. This country should be putting millions of plug-in hybrid and electric vehicles on the road. As far as I can tell, without big subsidies, there is no way in the near term to build these vehicles and make a reasonable profit, due to the stubbornly high cost of advanced batteries. Besides, if GM were owned by the government, it wouldn't spend time and money litigating and lobbying against clean-air and safety rules

    Why not pick up Ford and Chrysler too? If Chrysler goes south, it's too small to drag down the rest of the domestic auto industry. Ford, which has been pursuing its "Way Forward" cost-cutting plan for more than two years, will probably survive the moment without government assistance, though it's going to be close.

    To be sure, the yard marks of democratic capitalism have moved under us in recent months. Last week, the feds announced that the government would take a $20-billion stake in Citigroup and guarantee hundreds of billions in risky assets, a move that would have seemed pure socialism had we not lived through the last few months. Have we not in effect nationalized the mortgage-loan industry?

    I say, let's avoid the euphemisms and have the courage of our supercharged Keynesian convictions. By nationalizing GM, we can aim the company's astonishing resources at one of the biggest public-policy problems we have: oil. Restructured and refocused, GM could build green vehicles by the millions in a few years and still have the capacity to build gasoline- and diesel-powered pickups (which we'll still need) ... and maybe even some Corvettes on the side.

    Dan Neil is The Times' automotive critic. [email protected]
     
  16. Chris H.

    Chris H. Member

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  17. dpeilow

    dpeilow Moderator

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