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Tesla Gets Federal Bailout Dough – Where Are The Jobs Going To Be?

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If I were to start a automotive company I'd leverage the infrastructure that already existed, in Detroit, where there are factories and people who build cars.

CEO Elon Musk of Tesla Motors has convinced the US government to spot him 350 million dollars. That's 350 million dollars for a company that wants you to buy their electric sports car with the $100,000 you have under your mattress. Now I see why he wants to build them in California — you won't find Rodeo Drive on a map of Detroit, but you will find Gratiot.

This is obviously a sign that the Obama administration wants to end foreign oil dependence, but to give them $350 million because they have 1,000 customers waiting for a roadster? C'mon, just because some wealthy people can buy a neat little electric sports car doesn't mean this company can grow to the likes of the Big Three. What are Tesla's manufacturing capabilities, and who do they have that can scale an automotive manufacturing company? Because so far they are having some difficulty producing a few thousand cars.

What about Detroit? Seems that Tesla decided to shut down that operation by firing 90% of the staff and notifying them via their blog. They then relocated the rest to California where they plan to manufacture these cars. They were supposed to have a site in San Jose, but that fell through. An area that's been building cars for 100+ years with skilled labor and an infrastructure in place, and who knows how to get its hands dirty and get to work, and Tesla says no, we can do it in Cali?

Sure, they did build a neat little electric car but what's the safety rating? Any long term testing on real world applications? I wonder how one of these would handle in the rain or snow, seems they love to test them in Cali, but how realistic is that for a company that hopes to revolutionize the industry?

Thanks to some Silicon Valley geeks and their buckets of money we are now going to trust a web 2.0 company to lead the auto industry — how sad. It's not that I don't like these Internet start-ups, having started one myself, but they just operate on a different level than most businesses mostly due to the speed with which software can be built. Changing things too fast can cause instability in the supply chain, and this brings up another question. Who are the suppliers for Tesla and how do they perform?

People devoted their lives to these companies, like my great-grandmother who worked at Chrysler for 40 years sewing together leather interiors — or maybe it was "pleather" — but she would always have money in her pocket to take us out for a hamburger or buy us some shoes. When I say she had money, I mean actual money, not credit cards like everyone seems to use today. Thanks to the billions the government just gave to the banks so they can give us more credit cards instead of the small business loans we need so desperately to rebuild this country. As Mitch Albom kindly points out, we sure are watching over our banks, a lot of good they are doing for the country.

When I was just out of high school I worked for a company in Redford, Michigan that made "screw machine products."  People came from all over the world to live and work in Detroit, like Frank Sherosky who worked on the screw machines. Frank came from the coal mines, and hitchhiked to Detroit to build a better life for his family.

So what stories like that do you think Tesla is capable of producing? Do you think people like Frank will be able to spend 30 or 40 years at Tesla?

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About Scott Golembiewski

  • http://www.peakoilgarage.com James

    The federal loans are NOT for the Tesla Roadster ($109,000). That product has already been developed and is in production.

    Tesla Motors is requesting the federal loans for two other projects. The Sedan model which will cost under $50,000 with an electric range of 200+ miles.

    The other loan is for their battery and drivetrain business which will sell the technology to other companies. For example, they just signed a deal to sell 1,000 battery systems and chargers to Daimler for the Smart EV, a subcompact that will cost around $20,000 each.

  • http://www.peakoilgarage.com James

    It looks like the Tesla Roadster performs just fine in the cold weather and even on ice. The system has an internal battery heater for cold weather operation.

    As for your question on safety rating, here is the video of the crash testing.

  • http://www.republicofdave.com Dave Nalle

    I’d swear my past reading on Tesla included info on plans to develop a lower-end vehicle for the mass market, down in the $30K price range. That might justify some millions in federal backing.

    Dave

  • bliffle

    Maybe the $300million was tablescraps left over after the financial corps picked over the $trillion for their personal bonuses and ‘retention’ bonuses for their brothers-in-law, etc.

    Maybe it was just so small that it escaped their notice.

    I hope that the $2-3 trillion committed to the Financial Corps was more to the authors liking.

  • Chris

    You state that the detroit auto makers would benefit more from the $350 million than Tesla. This is true, but the money is given ultimately not for the benefit of the companies that need it, but for the people of the United States. GM, Ford and Chrysler are in the position they are in because of poor business practice. Specifically, they made products people didn’t want to buy. They didn’t innovate either.
    Tesla is making a product people want to buy (12 month waiting list) and they are on the cutting edge of innovation, and this innovation could potentially have more of an impact on the lives of Americans than whatever the Detroit Three do. After paying out $25 Billion to rescue the people that caused their own demise, $350 Million is basically gambling money that might have a huge payoff.

  • Arch Conservative

    If Tesla is going to get some bailout money the least they can do is put on a few free concerts.

  • motorhead

    Appears that the author is not very much informed, and is emotionally biased. Which is sad to see because that is the attitude of many people with a limited amount of desire to learn the facts.

    The US got to let the badly managed big auto 3 and big banks fail, instead use the funds to support greener auto companies and more responsible smaller banks. And use the funds to help create jobs for workers from the failed big 3 and failed banks.

  • Nick

    What a horrifically misinformed article.

    The $350 million is for their new sedan program, which will result in a plant being built in the United States. It will produce 20,000-30,000 cars a year. The Model S will be priced against the midsize luxury sedans from BMW and Mercedes. It is looking like it will be a good deal, actually. Tesla is planning cheaper models, too. They’re also helping Daimler build a $20,000 electric Smart car.

    $350 million is 1.5 percent of the $25 billion Department of Energy loan program for alternative energy vehicles. GM and Chrysler want $8 billion each. Ford wants $5 billion.

  • http://www.wmdlondon.com Will

    Tesla looks like a money pit to me. 2 yrs ago there were plenty of people willing to pay $110,000 for an electric car based on an old Lotus. Not now. 12 month waiting list? Its not that long. How many cars have they produced so far? I hope the new cars have realistic prices and I hope Obama keeps an eye on Teslas books.

  • Doug

    #6 — February 17, 2009 @ 06:41AM — Arch Conservative
    If Tesla is going to get some bailout money the least they can do is put on a few free concerts.

    Comedy Gold!

  • Cannonshop

    Any new technology field is going to start at the high end of pricing-look at laptop/notebook computers for an example, or desktops a decade before that.

    We’ll see if the Tesla is market-viable or not, but unfortunately, we’re going to see it AFTER it’s eaten 350 Million Dollars of Tax money, to produce a car likely about as reliable as a Zil.

  • bliffle

    Nick observes:

    “$350 million is 1.5 percent of the $25 billion Department of Energy loan program for alternative energy vehicles. GM and Chrysler want $8 billion each. Ford wants $5 billion.”

    One might point out that the Big3 have terrible records when given development funds. They invariably find ways to fold the money into their general funds and stiff the taxpayer.

  • E

    I wonder how one of these would
    handle in the rain or snow

    Works pretty good in rain, actually. Snow, never tried.

    As for price, a new Tesla costs roughly the same as a new ZR1. I wouldn’t trade my Tesla. Which at some level is GM’s fundamental problem … too many cars that aren’t somebody’s 1st choice.

  • Mark Tomlinson

    We might also point out that the Big 3 are getting funds from the Troubled Asset Relief Program (TARP; the “bailout”). Tesla applied for the loan from the Department of Energy’s Advance Technology program, which was signed into law months before even the first bailout was even suggested.

  • Clavos

    We might also point out that the Big 3 are getting funds from the Troubled Asset Relief Program (TARP; the “bailout”)

    Actually, Ford has turned down federal money so far.

    Buy American; Buy Ford!

  • http://takeitorleaveit.typepad.com/ Roger Nowosielski

    I’ll second that.

  • http://takeitorleaveit.typepad.com/ Roger Nowosielski

    Another breaking story with GM:

    47,000 more layoffs.

    Shouldn’t there be any condition attached to these bailouts – as for example, relating to maintaining certain employment levels?

  • Glenn Contrarian

    Me third! Buy Ford!

    And be nice to your local auto mechanic and do NOT buy Fiat….

  • http://takeitorleaveit.typepad.com/ Roger Nowosielski

    I always owned US made cars/trucks (except for my first VW). I wouldn’t buy a foreign make – but I did have Citroen-Maserati (used) and I don’t regret it.

  • http://www.EurocriticsMagazine.com Christopher Rose

    Buy a Ford? Are you joking? I don’t know how they are seen by you guys but in the larger world the US car manufacturers are widely seen as producing rubbish cars.

  • http://ruvysroost.blogspot.com Ruvy

    I don’t know how they are seen by you guys but in the larger world the US car manufacturers are widely seen as producing rubbish cars.

    I have to agree with Chris – this, in spite of owning a Saturn for 8 years and finding it a great car. Saturns, before GM got their hands directly on the company, were basically Subarus designed for a lower price scale. They were well designed at first, and were cars of reasonable quality. The Focus, a Ford product hustled heavily here in Israel, was, according to Consumer Reports, unreliable in most respects.

    Since I do not drive in Israel, I’m unaware of the quality of vehicles imported here, but the Seat is basically a Fiat produced in Spain, and the Skoda is a Volkswagen produced in Bohemia.

    I would remind everyone that a Mazda is basically a Ford with a Japanese name, though.

  • http://www.EurocriticsMagazine.com Christopher Rose

    Point of order: a Seat is basically a Volkswagen produced in Spain.

  • Cindy

    My first car was a Fiat 850 Spyder, which I bought used on the day of my 16th birthday, for about $900, with money I earned myself. What a time…to be 16 in California and have a convertible.

  • Cannonshop

    #20 Seen with good reason-GM especially, though some of the defunct companies died after producing some decent machines- the AMC Eagle, for instance, or the IH Scout II.

  • http://www.authorfrank.com Frank J. Sherosky

    For $100k, the Tesla SHOULD be a cool car; and one can argue the gov’t money is not a bailout, but an investment in its tech. As if Detroit doesn’t have tech!!! What’s the Volt? Or the fuel-celled hydrogen vehicles.

    Besides, Detroit’s Big-3 workforce (real people)and supplier chain (more real people) already paid lots of taxes over the years, bought other products, etc. Working men and women in the industry did NOT cause the economic problem. They’re just trying to support their families just like everyone else.

    And, yes, “Frank” was my father. Thanks for noticing!

  • Jim

    Tesla are real people too. They may not have union insignias on them, but they are still people. Unlike Detroit, they are putting innovative cars on the road.

    The Volt… do you know GM only designed it, because Tesla pants-ed and utterly humiliated GM by building the Tesla? Bob Lutz has confirmed he had to “pound tables” to get GM to build the Volt in response to Tesla. It’s not that GM’s leadership can’t build the right cars; they choose not to. It’s not that Michigan autoworkers can’t do their jobs well and for a fair paycheck. Too often, they choose not to… striking, slowing down, trumpeting their woes, extracting heavy blows against society, acting like it’s our fault for this and that. Detroit should know we are in the modern world now, post-1980s. They can be winners if they decide to play the game called please the consumer. This article is at once pitiful and arrogant. Detroit’s similar arrogance (“no we won’t go bankrupt, we’ll get the president to inject funds”) is perplexing and aggravating.