Tesla Motors and Government Money

[stopcrazypp]

Tesla Motors - think
Tesla opposes using advanced vehicle fund for Detroit bailout - AutoblogGreen

Tesla just posted a blog entry showing their disapproval for the plan being pushed by some members of Congress to divert the $25 billion from the Advanced Technology Vehicle Manufacturing Incentive Program (ATVM) (aka DOE loans) to bailout the Detroit 3 given the current deadlock with the other proposal.

It gives details about what two projects Tesla Motors was referring to earlier:
"The first project is an Advanced Battery and Powertrain Manufacturing facility that would supply batteries and components for Tesla cars and, more importantly, for other automakers. The second project would help us to finance a manufacturing facility to make our second vehicle, a five-passenger sedan known as “Model S.” We submitted our application to the DOE Nov. 16 – three days after the program became official."

 

[WarpedOne]

Advanced Battery and Powertrain Manufacturing

Aka TEG - Tesla Energy Group, resurrected.

 

[DDB]

...and we can't let Tesla fail because possibly 3 million jobs depend on it [sarcasm]. I'm no fan of bailouts, but come on, a bit too self-serving here.

 

[Cobos]

Considering the global decline we are heading into many of the Detroit 3's jobs are going to be cut if they get a bailout or NOT. And the fact that many of those millions of jobs are with the suppliers of the Detroit 3 means that they would sell to anyone making cars. Does that have to be GM, Ford and Chrysler? What if Toyota buys up a large chunk of Chrysler, don't you think their American factories will use many of the same suppliers? I fail to see how money set aside for Ford's future lineup could help them today. If they can't afford the development for the cars people want in 3 years then they will be dead in 3 years and will have a huge dept, not to the banks but the US state instead.

I fail to see how that can be good for the US economy except maybe in the very near term, as in next 6 months or so...

Cobos

 

[doug]

Just to be clear, is this ATVM program the same DOE loan guarantee that Elon said Tesla should get pending environmental approval for construction of the San Jose campus?

 

[stopcrazypp]

Just to be clear, is this ATVM program the same DOE loan guarantee that Elon said Tesla should get pending environmental approval for construction of the San Jose campus?

It's a little confusing that both of them are DOE loans but it appears they are not the same, the loan guarantee earlier was this one, a different program:
Tesla and 15 others being considered for DOE's Loan Guarantee Program - AutoblogGreen

 

[graham]

Gas 2.0 agrees with Tesla on this one:

Tesla Says Money Shouldn’t be Diverted to Bailout Car Makers : Gas 2.0

I happen to fully agree with Tesla on this one. That money is intended to rectify the problems that got the big three into trouble in the first place — that being their lack of foresight and desire for change. As New York Times contributor Micheline Maynard has said, “Detroit [has] proved yet again that it [has] not understood the psyche of American consumers.”

In other words, Detroit missed the boat and made a fatal strategic calculation that people would continue to buy larger and larger cars without nary a second thought.

 

[doug]

It's a little confusing that both of them are DOE loans but it appears they are not the same, the loan guarantee earlier was this one, a different program:
Tesla and 15 others being considered for DOE's Loan Guarantee Program - AutoblogGreen

Thanks for the clarification.

 

[just-an-allusion]

When you review the language of the ATVMIP in it's entirety, it is implicitly clear that the available funds are not intended for use as a "bailout" by anyone.

 

[doug]

Department of Energy - ATVM Loan Program

http://www.atvmloan.energy.gov/keydocs/finalrule.pdf

 

[graham]

Interesting counterpoint to the Stross article. A different NYT article mentioning that lots of small companies are vying for part of the $25 billion ATVMP including Tesla. Merely facts stated, with less editorializing:

http://www.nytimes.com/2008/12/02/business/02bailout.html?_r=1&ref=business

 

[just-an-allusion]

...and we can't let Tesla fail because possibly 3 million jobs depend on it [sarcasm]. I'm no fan of bailouts, but come on, a bit too self-serving here.

The point that I think you're missing is that the so-called "Big 3" got themselves into the financial mess they are in today due to ignoring environmental necessity, consumer demand, governmental dictates, as well as employing shoddy workmanship providing a sub-standard work product even though they had all of the best materials and the largest labor force non-par, and just overall poor business practices.

"Bailing" them out would only provide them with the opportunity to prolong the malaise and temporarily stave off the inevitable, long needed restructuring from the top down, not to mention providing the upper level managerial staff with some well padded retirement/severance packages, as well as divert predetermined funds from the intended industry applications.

Simply put, they got themselves into this mess on their own accord, through their own machinations and mismanagement practices, they should be able to get themselves out...being unable to is demonstrable of their inability to not only manage their business, but also to provide a market/consumer viable work product, i.e., failure.

Basic, simple common sense teaches us that we don't throw good money after bad...Now what was that about "self-serving"??

 

[vfx]

Any good investment portfolio is diversified into many sectors. I blame the US D3 for not even having one "Prius" in their lines.

Make your Hummers but keep your EV1 too.

 

[stopcrazypp]

How Risky Is Tesla’s Bet on a DOE Loan Guarantee? Earth2Tech

More details on the DOE loans. Looks like Tesla needs the new $400 million loan if they want to have a good chance of progressing in Model S on time. The $200 million DOE loan guarantee might come too slow and Tesla isn't the first in line to get a guarantee.

 

[graham]

Good article: How Risky Is Tesla’s Bet on a DOE Loan Guarantee? Earth2Tech

This is a good article, thanks dpeilow! It explains a lot of the details of the different loans and where Tesla stands with them.

If I am reading it correctly, Tesla is in good position to get the $200 million loan (as part of the $4 billion 2005 package) but there are still hurdles to obtaining it (famously, the environmental impact delay in building the manufacturing plant) and the bureaucracy involved might delay disbursement to Tesla beyond the time table (late Spring/ early Summer) that Tesla has been hoping for.

The $400 million dollar loan (as part of the 2007 $25 billion package) is more of an unknown, but is a backup plan in case the $200 million either falls through or is delayed. The $400 million loan has more favorable terms than the $200 million but it is unclear at this point what Tesla's chances are in obtaining it, or what timeline it is offered.

Considering the other car manufacturers want part of the 2007 $25 billion as a quick bailout, it seems like Tesla has a shot at getting that money quicker than the 2005 $4 billion. Either way, I hope both loans work out for Tesla, and quickly. I want the Model S on the road soon.

 

[doug]

The Motley Fool: One More Reason We Shouldn't Bail Out Detroit

You want to talk about efficiency? Tesla designed and brought to production its first model -- a car that practically transformed the automobile as we know it -- for $140 million … start to finish. For comparison's sake, $140 million is exactly one-tenth of what Detroit collectively spends each year on its so-called "jobs bank," a program that literally pays idle employees to do absolutely nothing.

SFGate: Auto bailout consequences

If the Big Three auto manufacturers receive financial assistance in this tight credit market, then it will increase the already high barriers to new technologies.

Any established technology has a large advantage over emerging technologies. Existing technologies have an established track record with customers, efficiencies of scale and market share.

Yet, there are always small technology companies trying to evolve or revolutionize an industry.

 

[doug]

Opinion: Why Congress shouldn't divert funds to Big Three - San Jose Mercury News

Opinion: Why Congress shouldn't divert funds to Big Three

By Elon Musk

Special to the Mercury News
Posted: 12/03/2008 04:37:30 PM PST

 

[Chris H.]

Opinion: Why Congress shouldn't divert funds to Big Three - San Jose Mercury News

$57,500 for the Model S... This looks like a price drop.

Elon is nothing if not transparently self serving. However, I do agree that the D3 should keep their money-grubbing paws off the ATVMLP.

 

[just-an-allusion]

Opinion: Why Congress shouldn't divert funds to Big Three - San Jose Mercury News

I agree completely.

I had hoped that this weren't the case, but there was always the somewhat obvious fact that the "Big 3" specifically asked for "$25 billion" (without any explanation of how they came up with the figure), which happens to be the exact amount of the AVTMIP package, hmm....

I guess that I just didn't want to admit to myself that these so-called "industry leaders" were that corrupt, or would stoop to such despicable business practices.

You don't rob Peter to pay Paul and industry is not meant to be a process of two steps back and only one forward, even though it would only be a temporary fix.

p.s. Thanks doug.

 

[graham]

$57,500 for the Model S... This looks like a price drop.

And puts it right at $50,000 with the Federal tax break. $45,000 for Californians if they can extend that tax break beyond Mar 31. $45,000-$50,000 for a Model S (along with guaranteed commuter-lane capability) is pretty compelling.