Tesla applying for new loan?

[NigelM]

Although I'm not familiar with the finer details, it seems that if the political decision is to make a certain budget available to support advanced technology projects, then any car company being able to meaningfully use such a loan for a meaningful project, even has a certain obligation to file an application. Or is this just one of several different ways of looking at it?

You are correct, although it's not necessarily a political obligation but Tesla has an effective (arguably legal) obligation to it's shareholders to make an application:

1. Pretty much all companies run with some sort of debt (I would argue ALL public companies) and that debt is at commercial rates with banks (or possibly bondholders).
2. The rates charged by the banks result from the banks assessment of the inherent risk and on new technology (unproven?) will tend to be high.
3. The ATVM loan program is aimed at providing low-cost financing as a way to encourage development, expansion and job creation.
4. Management has a duty to shareholders to operate the business in the most cost effective way. Therefore, management is pretty much obliged to apply for as much of the ATVM money as they can get (potentially, even regardless of whether they really need it!).

Some company attorneys would probably argue that the duty of care owed by management to shareholders actually creates an automatic legal requirement to file an application. IMO, they would have good grounds for arguing such a scenario.

 

[Norbert]

So if my understanding of the situation is correct, I'd actually prefer the money earmarked for Katrina than another Fisker, Solyndra, GM, Chrysler, or even Tesla.

Of course, but the proposal to take the money from the ATVM program is not the only possibility, I think it is somewhat arbitrary (if not mean) to pitch those two against each other.

In any case, even if the proposal (to take the money from the ATVM program instead of from somewhere else) goes through, there would still be some amount left in that budget, and the DOE should still be given the opportunity to select Tesla's Bluestar project instead of any of the other ones, for example instead of giving the full amount to Chrysler for possibly multiple projects.

Nevrtheless I think you are right that trouble comes from pitching Tesla against Katrina relief.

 

[Doug_G]

Nevrtheless I think you are right that trouble comes from pitching Tesla against Katrina relief.

That's completely arbitrary, and just another sign of the total gridlock in Congress.

 

[Larry Chanin]

That's completely arbitrary, and just another sign of the total gridlock in Congress.

Hi Doug,

A postive sign.

$25 billion green-car fund dodges bullet

Larry

 

[AnOutsider]

Hi Doug,

A postive sign.

$25 billion green-car fund dodges bullet

Larry

Hmm...

Conservative members of Congress this time agreed to drop efforts to trim the $25 billion pool of money by $1.5 billion to fund disaster relief as part of the resolution that would keep the government operating until mid-November.

They were only seeking to cut it by 6%? Really? I would've voted to do it. Disaster relief is far more important than giving a startup (or established Goliath) some cheap funds.

*edit*

Those not among the chosen have been some of the program's severest critics. One is a small firm in San Diego County, Calif., that made waves a few years ago with an egg-shaped electric car, the Aptera. Steve Fambro, co-founder of Aptera who has since moved on to an agricultural venture, says he recalls showing up at events with a drivable version of his car only to see rivals push mock-ups off a trailer.

Yet some of them got money; his company did not.

Nevermind all the other problems Aptera had (XPrize anyone?). I wouldn't have bet my money on it either.

 

[AnOutsider]

Also from that article:

•Fisker Automotive, $529 million. Jobs saved, 2,000. Cars removed, 30,000.
•Tesla Motors, $465 million. Jobs, 1,500. Cars off the road, 5,000.

so I was right.. Fisker got more. Not sure how they're calculating the Cars removed thing though.

 

[PopSmith]

A postive sign.

$25 billion green-car fund dodges bullet

Thanks for the link, Larry. I noticed this as well:

The number of cars removed is a DOE index, saying the improved fuel economy would equal removing that many cars yearly from the road.

Tesla Motors, $465 million. Jobs, 1,500. Cars off the road, 5,000.

So 1,800 Roadsters are equal in emissions to 5000 dino burners, according to the DOE? Not bad, although I'd love to see that number when Model S is factored into the equation!

 

[AnOutsider]

So 1,800 Roadsters are equal in emissions to 5000 dino burners, according to the DOE? Not bad, although I'd love to see that number when Model S is factored into the equation!

If that's the case, then 0 karmas delivered = 30,000 cars off the road. I guess all the pre-orderers are refraining from driving until theirs arrives

 

[PopSmith]

If that's the case, then 0 karmas delivered = 30,000 cars off the road. I guess all the pre-orderers are refraining from driving until theirs arrives

Yeah, that threw me off a bit and is why I said "Why not factor in Model S reservations?". Not only that but according to this article the Karma has 3000 pre-orders. How does 3,000 undelivered cars equal 30,000 cars off the road but 1,800 Tesla's being driven around only equal 5,000 cars off the road?

 

[VolkerP]

I don't get political, but I do feel as if one of the things I look to my government to do is to provide protection and assistance in times of war or disaster. We saw what happened with Katrina. So if my understanding of the situation is correct, I'd actually prefer the money earmarked for Katrina than another Fisker, Solyndra, GM, Chrysler, or even Tesla.

That might resemble the decision to eat the corn in the winter vs saving it for seeding in springtime.

Historically, North America is responsible for a fair amount of CO2 in the atmosphere, equal to the area in the chart below.

The CO2 now comes back to us as climate change, rain floods, droughts, heat waves, raising sea levels. and stronger hurricanes, with the latter two taking out New Orleans in 2005.
Thus, spending (no: lending) a dollar in clean tech might well save a hundred dollars in cleaning up the mess afterward.
Image is from according chapter in David MacKays excellent book about renewable energy, online version here.

 

[Norbert]

That might resemble the decision to eat the corn in the winter vs saving it for seeding in springtime.

... when you have tons of food elsewhere (as well as a large debt of food, that is).

 

[AnOutsider]

That might resemble the decision to eat the corn in the winter vs saving it for seeding in springtime.

Historically, North America is responsible for a fair amount of CO2 in the atmosphere, equal to the area in the chart below.

The CO2 now comes back to us as climate change, rain floods, droughts, heat waves, raising sea levels. and stronger hurricanes, with the latter two taking out New Orleans in 2005.
Thus, spending (no: lending) a dollar in clean tech might well save a hundred dollars in cleaning up the mess afterward.
Image is from according chapter in David MacKays excellent book about renewable energy, online version here.

Uh huh... But if we don't have things in place to protect people from whatever may come about, there may not be much of a future to think about. Also, it's not like taking 1.6B of 25B is KILLING the program (less than 10B disbursed so far 40%), or like manufacturers can't continue to work towards building clean vehicles without the loan money.

I think the above is holding a very narrow and selfish view in the grand scheme of things. You don't take money from essentials to provide a nice-to-have thing. Disaster relief is essential, giving a head start to hand-selected candidates to build vehicles is not. I'm sure they'd be looking for some of that FEMA money should the San Andreas fault wreak havoc on California or a monster flood hits Delaware. Would reducing carbon footprint justify the lost of human lives or destroying an economy?

Again, this may just be arbitrary as some mentioned, but if it did come down to Green Tech vs Ensuring the safety and livelihood of American Citizens, I firmly vote the latter. Green house gasses be damned.

*edit* also, trying to spin disasters like Katrina on climate change is weak at best, but mostly insensitive. Regardless of the cause, had the money been there, the impact would have been lessened and more lives would have been saved. That would have been worth cutting 6% of a budget for funding startups that may or may not produce something that actually saves lives down the road (Solyndra).

 

[Doug_G]

You can't pin a specific storm on climate change, or on climate at all. These are statistical things. AFAIK the science is not even firmly decided on whether climate change actually does increase average storm intensity.

Plus, I'll repeat: It's a false choice. There isn't any reason to decide between "green tech" and "safety". You could as easily say you have to decide between "social security" and "safety", or "military spending" and "safety". It's utter nonsense to pair up any of these things.

 

[Jaff]

Agreed!

You can't pin a specific storm on climate change, or on climate at all. These are statistical things. AFAIK the science is not even firmly decided on whether climate change actually does increase average storm intensity.

Plus, I'll repeat: It's a false choice. There isn't any reason to decide between "green tech" and "safety". You could as easily say you have to decide between "social security" and "safety", or "military spending" and "safety". It's utter nonsense to pair up any of these things.

 

[Larry Chanin]

[...] It's a false choice. There isn't any reason to decide between "green tech" and "safety". You could as easily say you have to decide between "social security" and "safety", or "military spending" and "safety". It's utter nonsense to pair up any of these things.

Hi Doug,

I agree.

In this NY Times article it seems to me that this is merely another politically created crisis.

Senate Reaches Deal to Avert Government Shutdown

Democrats sought to frame the latest problem as one manufactured by House Republicans, who last week passed their own bill to provide $3.65 billion in disaster relief to FEMA partly paid for with cuts to loan programs to support energy-efficient cars and alternative energy.

Immediate emergency aid for natural disaster victims has historically been distributed without offsets in the budget.

Larry

 

[Norbert]

Slight turn of events:

How We See It - Changes to the ATVM Loan Program | Forums | Tesla Motors

Note: Inaccurate press stories state that Tesla has applied for another ATVM loan. Those reports are wrong. Tesla has no pending applications before the DOE.

 

[AnOutsider]

No pending... Denied or approved?

 

[Norbert]

No pending... Denied or approved?

The first sentence would mean... not even applied (the emphasis on the third sentence was mine). Not sure where or how the SFGate article originally got the idea there would be a second application, but I suppose the "confirmation" mentioned in my first post (in this thread) was referring to the first (and only) loan, yet mentioning it in the 'present tense' perhaps because the loan hasn't met all milestones yet and (perhaps) isn't paid out in full yet. Perhaps, when Tesla's spokesperson was asked for confirmation, it wasn't clear that was asking about a second loan.

I'm afraid we'll never know what exactly happened... but it could even be that someone got the impression there was a second loan simply because the first loan is still in the process of meeting milestones and getting paid out step by step.

(Or because the Model S and power train loan parts were handled separately.)

 

[Larry Chanin]

The first sentence would mean... not even applied (the emphasis on the third sentence was mine). Not sure where or how the SFGate article originally got the idea there would be a second application, but I suppose the "confirmation" mentioned in my first post (in this thread) was referring to the first (and only) loan, yet mentioning it in the 'present tense' perhaps because the loan hasn't met all milestones yet and (perhaps) isn't paid out in full yet. Perhaps, when Tesla's spokesperson was asked for confirmation, it wasn't clear that was asking about a second loan.

I'm afraid we'll never know what exactly happened... but it could even be that someone got the impression there was a second loan simply because the first loan is still in the process of meeting milestones and getting paid out step by step.

(Or because the Model S and power train loan parts were handled separately.)

Hi Norbert,

Here's an update from the San Francisco Chronicle.

Tesla fed loan update

Last week, we reported that Tesla Motors wanted another U.S. government loan, on top of the $465 million the electric car-maker already received.

Tesla has used its original federal loans, awarded in 2009, to open an electric power train facility in Palo Alto and revamp the old NUMMI auto plant in Fremont. The company last week revealed few details about what it would do with another loan, or how big a loan it would seek.

Instead, a Tesla representative simply told the Chronicle, “Tesla has applied for a loan, in our continued mission to make more affordable electric vehicles.”

Turns out the company may have been getting a bit ahead of itself.

Ricardo Reyes, Tesla’s vice president of communications, called us this morning to clarify that the company is considering another loan, and been working through the pre-application process. But Tesla hasn’t made a decision on it or submitted a formal application to the US Department of Energy, which administers the loan program.

“Tesla has no completed loan applications pending before the DOE,” he said.

The program that has awarded loans to Tesla, Fisker Automotive and a handful of other car companies is separate from the one that gave $528 million to Fremont’s Solyndra, which declared bankruptcy earlier this month.

But the political furor over Solyndra’s loans has spread to all of the federal programs supporting renewable power and alternative energy technologies. Last week, congressional Republicans proposed cutting $1.5 billion from the Advanced Technology Vehicles Manufacturing program, which supplied Tesla’s loans. The cuts were supposed to be part of a stop-gap spending bill that would keep the federal government’s operations funded through November. The bill’s final version, however, didn’t include those cuts.

– David R. Baker

Larry

 

[Norbert]

Hi Norbert,

Here's an update from the San Francisco Chronicle.

Tesla fed loan update

Larry

Thanks for the link!

At this point, without hearing Tesla's side, or at least a larger verbal quote, I don't feel assured that this is not just another misunderstanding. I'd expect that every company intending to build additional EV models, or adding additional manufacturing, would at least consider to apply for a loan, so that doesn't really seem to mean anything.

My view is that if they can use the money meaningfully for their next big project, to make it happen sooner or possible at all, then they should apply so that the DOE can decide whether that is something they want to support, or not. The DOE could for example make it a condition that they produce the Model S for a few months and demonstrate profitability and customer satisfaction.