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Ordinarily, a story like this wouldn't come with any kind of political significance, but Tesla's progress in repaying U.S. loans reminded me of something.
Tesla Motors Inc., which received $465 million in U.S. Energy Department loans to develop and build electric cars, will repay the funds five years ahead of schedule in a plan approved by the government.
The carmaker said in its annual report yesterday that the department approved amended terms of the loan agreements that enable it to complete repayment by December 2017. Starting in 2015, the Palo Alto, California-based company will make accelerated payments from excess free cash flow, Chief Financial Officer Deepak Ahuja said in a telephone interview. [...]
The maker of battery-powered Model S sedans, led by billionaire Elon Musk, has a goal of becoming profitable this quarter, with deliveries of the vehicle forecast to rise to a record 20,000 units in 2013.
I'll concede that I'm no expert when it comes to cars or auto manufacturers' finances, though it certainly seems like good news that the Obama administration took a chance on an innovative car company, and now that company is paying taxpayers back -- ahead of schedule.
The political part kicks in, however, when we look back at the 2012 presidential election. I read the transcript of just about every speech and interview Mitt Romney did last year, and I seem to recall the Republican condemning Obama's loan to Tesla all the time. In the final months of the race, it was a standard line of attack: the president was recklessly using our money, Romney said, to "pick losers." Obama was so irresponsible, he even invested in Tesla Motors.
Romney was so fond of the criticism, he even brought it up during one of the debates. Paul Ryan joined in on the fun, condemning Tesla's loan on the stump as well.
I'm curious, given these new developments, whether the GOP still considers the administration's loan an outrageous abuse worthy of public scorn.
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It is at this point that Romney & Ryan and the other GOP elite will start condemning Obama for allowing Tesla Motors to get out of paying we the taxpayers the interest we deserve for taking a chance on them. Freakin' Obama, man.
I think the point is Republicans do not believe the government should be in the position of picking winners and losers. This is more so the case with Elon Musk, a multi billionaire who owns Tesla, most certainly did not need to go to the government to finance his venture in Tesla.
I'm glad Tesla is paying their loans back early, but at the end of the day the never should have had the loans in the first place. Tesla already benefits from massive federal and state tax breaks at the dealership level - How much assistance does this car company need to be "competitive?" and why should they get tax breaks when my company provides lots of jobs too but my customers don't get tax breaks when they buy my company's products.
I don't buy this line of thinking at all. How is giving out loans to a range of companies in an area you want to promote (electric cars, solar, etc), picking winners and losers?
Because, corporatism never ends well and goes against free market principals. It is not the job of the federal government to decide who gets tax dollars and who doesn't, they are not supposed to be involved with investing in private industry via loans or any other vehicle.
Look what is happening with student loans, the government is fueling a false demand for education with the notion that everyone should be entitled to a college degree. Although this is a nice gesture it breaks the simple rules of economics because demand is not fueling the demand for education the government is. So, now when a student graduates from college his degree is worthless because everyone has one, and because everyone took out a loan to get their education the demand for education was inflated beyond what an education is really worth thus driving the cost of an education through the roof. Now that poor sucker that got his college degree will never be able to pay it off because there are not jobs and Burger King simply doesn't pay enough to make the monthly payments.
I won't go into details but the same thing happened with the Housing market, the government thought it would be a good idea that every American realize the American dream by owning a house, so was born Fannie and Freddie to supposedly provide a place that loan companies could dump all their loans to people that couldn't afford them, and we all know the end to this story.
The same thing applies to alternative energy, if there is truly a demand for it then let the market drive that demand by creating a company supplies what the market is demanding. If Tesla is only successful because the government gave them money then they are not very successful at all.
You are absolutely wrong. The companies will continue to produce and sell what they can make a profit on, aka gas cars, because the only "demand" is from people WANTING A HEALTHIER EARTH, but inevitably being stuck with what they make. The way of thinking that companies will do the "right thing" is absurd, and downright wrong.
Thank God for the wealthy elite like Elon Musk, who are using their wealth to further our technologies, and our species. Meanwhile, most billionaires are merely trying to increase their nest egg....that they had to buy a castle to put it in.
Hmmm - Gov't sponsors student loans based on the idea we need a competitive workforce; same reason as why they sponsor state universities, and high schools, etc. As for home ownership, the Gov't Sponsored Entities like Federal Home Loan Banks, and FNMA, date back to trying to help the housing market recover during the Great Depression - and they have worked brilliantly in over this last 80 years (they didn't cause the housing bubble or crash, and the housing market is recovering nicely anyway).
You can argue that Gov't shouldn't be involved in industry, I suppose - like, not making land grants for the railroads (picking a winner over water transport) or not building interstate highways (picking a winner over railroads, and picking winner-towns over loser towns) or not making the moot shot (simply stepping into space because the time and money scale were beyond commercial payoff.) Or that they shouldn't pay for health research (thus picking winners in medical treatments). Ad so on and so on. But - these aren't positions I would think make much sense. There is an appropriate time and place and style for Government investment, and it tends to be the risk reduction at the start of new technologies ... and so it might be for alternative energies and alternative transports.
They won't get it right every time (Government being human beings) so it's nice to see an investment end up being part of a winner of a company.
well lets see who picks losers.
McCain loser
Plain Loser
Romney Loser
Ryan Loser
Atkins Loser
Murdoch Loser
etc...
the whose who of losers Teapublican party.
I would LOVE to have a Tesla Model S. Sadly, I haven't a spare $87,000 to get the 85 kWh model I would want. 300 mile range, 0-60 in 4.4 seconds...and a sweet lookin' ride.
I would love one as well. The tech will become affordable enough at some point where us mere mortals can afford it. After all, the early cars build over 100 years ago were at a similar price point, once you adjust for inflation. Now we just need the electric car's Henry Ford.
Tell me. The CEO has one parked in his spot next to the entrance I use.
Yeah, they zip past uglyass Republicanmobiles, er, I mean Hummers, like greased lightning.
Mitt Romney is a Car Guy. It's true because he said so.
Three words
American Motors Corporation
Nuff said
I liked some of their vehicles , never owned one ...
I'm well aware of his father's history. I'm also reminded of his nonsense about the 2005 Mustang, and his wife's couple of Cadillacs. So unless she was tooling around in a CTS-V 6MT, I'm hard pressed to equate that as automotive enthusiasm.
Also an imported SUV guy (even though I admit to liking the Audi Q7 too)
http://www.autoevolution.com/news/mitt-romney-now-drives-an-audi-q7-52390.html
"I'm curious, given these new developments, whether the GOP still considers the administration's loan an outrageous abuse worthy of public scorn."
Well, of course they do, Steve. They'll have to figure out some different spin now, but the lies will be all over the MSM by this evening.
They won't even bother with "spin." They'll just continue to criticize the president for investing in electric car technology. Years from now, when the Big 3 have solid all-electric plug-in lines, they'll still be saying that it was a bad idea.
And people will still believe them
This is pretty funny. It's a self congratulatory article about repaying a loan, likely funded by borrowed money that will never be paid back. Gotta love those double standards, without them the left would have no standards at all.
Blanks, you are soooo desperate. Like a turtle turned over on it's back, flailing away with nothing to say.
Nice job Annie Oakley... It's brilliant of you to convienently forget the hoopla around loans to alternative energy firms. Much easier to dismiss out of sort this kind of news than own up to your false attacks... You are a potential leader...
IOKIYAR
Of course, the way Republicans deal with such facts is to create their own "facts." In other words, Romney, Ryan, Palin, Limbaugh, etc etc etc simply LIE. "Tesla isn't paying back their loan early." I would vote "Tesla" before I would vote for any of today's Republicans.
I for one am glad to see Tesla be successful. Fossil fuels are an old out of date technology and if we ever want to get away from using them companies like Tesla are important. I would like to see the government help more companies like this so our quest to come into the 21st century is as a leader and not a follower.
But then what would we do with a booming 21st century manufacturing economy? We won't owe China trillions and will have a strong middle class again... we can't let that happen.
How long before we find out that Romney is actually an investor in Tesla Motors and has made a boatload of money off the government loans. It would certainly fit the pattern.
The Obama administration and Tesla owe the Right Wing sound corps big time . Yet we hear no chorus acclaiming the indispensable contribution of our brethren's and sister-en's from the dynamic Right Wing imagery and engineering divisions .
The ability to austerely turn on eight cents saves the taxpayers two cents a turn . The ability to ,
Stop ! in the name of reverse your direction
Before you commit to what you said last week
As independent from reason and logic as only twue love can be ...
-May also be found deep in the bowels of right wingeries research and whine . This potential wealth contributor whose innovations with combination pairing of cheeses and crackers at wholesale prices , may beat the fervor reached with death panel hagiography .
We shall see , we shall see .
When will the credit extension due to the idea factory be extended past the now ? The somewhat dated , pedestrian "Reagan comics" of yesteryores visionory titillationory foundation , the humble maid of the sound of addition by subtraction
I go to the till when the sounds are not of money
I know I will hear what I've heard ad nauseam
Our dreams will be kept by excluding thinking
Then when I hear what I want , laughter tinkling endlessly with our rubes
Who fell in Love with a ruse from Monarchal dweams once more
It has not become this bright because I'm also known as Sunny
Just hum along if you don't know the words !
I am glad to hear that at least one billionaire is using his money to create some real wealth instead of stashing in an off shore account or some gambling operation like a hedge fund or shuffling it around in stocks on the stock market or commodities market which just inflates prices but rarely adds real value.
Tesla is not only an unprofitable company currently, it's unlikely to ever become one.
Pretty funny for a company that is actually cash flow negative (-266.08M and -335.66M) to say that
"Starting in 2015, the Palo Alto, California-based company will make accelerated payments from excess free cash flow, Chief Financial Officer Deepak Ahuja said in a telephone interview. [...]"
When you add in that it has twice as much debt to cash and that even on an EBITDA basis it's unprofitable, it's not surprising that 57% of the float is short.
They even filed a 10-K last week that their upcoming Model X won't begin production until late in 2014, a year later than previously scheduled.
There are serious questions whether this company will even be around in 2015, let alone repay a loan.
You mean, the company that's expecting to turn a profit now?
http://seekingalpha.com/article/1254281-tesla-predicts-a-profit-but-analysts-disagree?source=google_news
That company?
Of course, you can lie about it - most companies spend many years in the red before they ever make a profit. Some industries it's really uncommon for the actual production companies to ever run a profit (video games, for instance, most companies don't run a profit, even though the sector as a whole is profitable.) You can't build a product and a factory and have a profit now - profit comes later, after you use the factory and sell the product.
Which, this is the year that Tesla sells the product. So it's make or break for them.
Nice spin -- "cash flow negative" instead of "unprofitable."
The reason, of course, is that "cash flow" doesn't count invested income. You bought new equipment to handle rapidly increasing business? Cash-flow negative.
The company that keeps losing more than they expect to lose:
"Tesla Motors 4th-Quarter Loss Widens Despite Higher Revenue"
http://online.wsj.com/article/BT-CO-20130220-716182.html
If we learned nothing else from GM's 2000s history it's that selling more individually unprofitable cars, year over year, results in bankruptcy, not profits.
One of Tesla's problems is that car makers generally make their money from the dealerships and the captive consumer finance while the dealerships make their money not from the sales but from the service.
Tesla was trying to bypass the dealers with their own stores and they have no finance arm, leaving them no place to make a profit on their production.
They also have been using customer deposits to finance operations:
http://www.thetruthaboutcars.com/2012/03/tesla-using-customer-deposits-to-finance-operations/
Again, Benen couldn't have been more wrong on this story, if he wrote that the Detroit Lions were a good bet to make the 2015 Super Bowl.
DC:
It's hard to pay back loans from "excess free cash flow" when you don't have any, or profits either.
To show you how incredibly wrong Benen got this story, the only reason that they are making the change is because Tesla is about to go in violation of it's current loan repayment agreement.
"Tesla Motors Inc. (TSLA), the startup electric car-maker that received $465 million in U.S. Energy Department loans, must come up with a speedier repayment schedule after getting a waiver on existing terms.
The Palo Alto, California-based company, led by billionaire Elon Musk, said yesterday in a U.S. regulatory filing (TSLA) that it has until Oct. 31 to submit a proposal for “early repayment” of loan principal to the Energy Department.
Tesla said it received a waiver Sept. 24 from a requirement in the previous loan agreement to maintain a specified current ratio (TSLA) of assets to liabilities, which measures a company’s ability to repay its debts in the next 12 months."
http://www.businessweek.com/news/2012-09-25/tesla-told-to-speed-repayment-of-u-dot-s-dot-electric-car-loan
Slight correction for clarity
should say "was" not "is" about to go in violation, in the first sentence.
They negotiated the agreement in the fall of last year, and the story is only making headlines now because they put it out in their annual report yesterday.
They may have cause for confidence. Road & Track seems to like it:
And then he goes on for a page about the car's features where this observation occurs:
And it ends with:
Wow - thanks for posting those excerpts! I loved this awesome line from it:
"....the driving experience is an odd cognitive mash-up-somewhere between shouting Greenpeace-approved obscenities at Toyota Priuses and dusting Corvettes from stoplights on a cruise night."
Lol.
Had the opportunity to ride in one (tried hard as I could to get 5 minutes behind the wheel but noooooo....), and even as a passenger, this thing is Seriously Kickass. If I ever won the California Lottery...
This may be a bit embarrassing given the title of this article...
The $465 million Tesla Motors loan actually falls under the DOE's Advanced Technology Vehicles Manufacturing (ATVM) Loan Program which was authorized under section 136 of the Energy Independence and Security Act of 2007. It was signed into law by President George W. Bush on December 19, 2007. It's a Bush loan, not an Obama loan. Even Bush did something right occasionally.
BTW, I am long Tesla (TSLA). I've been in a Model S and it is really amazing. If my TSLA investments do well enough, I'm planning on buying one for my wife. I strongly encourage anyone that hasn't already seen one to take the time to stop by a Tesla Store and arrange a test drive if you can.
Tesla is one awesome car company. I just wish they could manage to start mass producing affordable cars.
The Tesla loan was made from a Bush Administration program. Why is this always tied to Obama? See Tesla statement here: http://www.teslamotors.com/blog/early-repayment-tesla’s-atvm-loan .
How does a bill opposed by a majority of republicans, proposed by DEMs, and passed 219 to 4 Dems in favor... Bush's bill? Really?
Bush going along with a bill enjoying broad public support despite GOP opposition make it "Bush's" bill? You are confusing opportunistic fingerprints with leadership. Tesla would not exist without Dems led by Pelosi.
Thank the Dems and Pelosi, not our former economic imbecile in chief.
"I'm curious, given these new developments, whether the GOP still considers the administration's loan an outrageous abuse worthy of public scorn."
It was brought up during a democratic administration. Of course they're going to object to it. The misnamed Republican party (should be the Obstructionist party) didn't bring it up the Dem's did. Automatically bad right there.
"I'm curious, given these new developments, whether the GOP still considers the administration's loan an outrageous abuse worthy of public scorn."
if not paid back, it would have been a loser. it is going to be paid back, so it is picking a "winner" - but why should government be doing either. why should this company get the money which one of their competitors did not - whether that competitor be electric, something else, or traditional fuel?
who have these loans actually benefit? investors of tesla, who had some of their risk alleviated to the taxpayer. buyers of teslas - who are rich people anyway. in both cases what's going on? we are subsidizing those (poor) rich folks. come on.
but these are so great and green! are they really? they cost a lot (of energy/resources) to make, and we still need to produce power to feed them, and they are still just toys for rich people. given the economics of rare earth metals for batteries, given the convenience trade-offs that come with all electric cars, are these really going to ever be adopted and affordable by the masses? i would put my money on squarely not, with the expectation of conservation technology going to do an order of magnitude more than this stuff ever will. start/stop engine, cylinders, turbo diesels, koenigsegg cam-less engine technology, etc.
the "journalist" that wrote this article is just an obama lover who has ignored the likelihood of any real return on a green investment for what they perceive to be one. the real story is it is a bush loan and a government one where taxpayer money was used to fund a technology and subsidize rich people who invested in stock/purchased the toys as a result which is not likely to contribute a significant amount to the reduction of fossil fuel depletion.
hurray.
you forgot the people who make the cars, and the people who make the parts for the cars, and the people who sell the cars, and the people who advertise for the cars, and the people who provide all sorts of goods and services for the people who do all those things...not to mention taxpayers, since we invested in the company. so no, not just rich people.
and you may put your money squarely on not, but that doesn't seem to have much factual basis behind it. if we get the electric grid off fossil fuels, then the energy it costs to make and run is much less, and pricing trends show that these cars will become more economically viable over time. Base price on the model S is around $52,000. their battery technology has also been superior and is being used by other manufacturers, and that's the real return on investment, though it will take a while to play out. But in 10 years or so, it is not at all unreasonable to assume that a car with similar battery capabilities will be available for half that. Bottom line is we need to be investing in both conservation technology, and technology that moves us away from fossil fuels.
that is a ridiculous argument. broken window fallacy anyone? that 465 million could have been loaned or spent elsewhere employing people. your people making the cars et. al are just those that happened to be involved in a company politically connected and got a political reward, vs. other people that may have earned the investment or done more with it. (or of course with this government, been other corporatists scoring favors)
so yeah. rich and connected people.
the WSJ just had an article 3/11 on co2 emissions building these cars (massively more than a gas car) as well as those taking into account where the power comes from. the reality is they aren't saving a ton of co2 and are expensive. making more of the cars and the cars being cheaper isn't going to change that they use RARE earth metals and massive demand would only make those more expensive. you are of course ignoring the advances in simple gas technology i mentioned above (and those yet to be invented) that will allow gas powered vehicles to go much further. and you are ignoring the adoption of these cars that are at a great sacrifice to convenience with their range, which diminishes with age, as well as running an air conditioner, as well as running a heater, and the effect these range sappers and convenience robbers will have on car buyers. in 10 years electric cars will be used in a small nichey part of the market, and cars like this will have barely any market share and still be toys for rich people. the dream of millions of people owning them by 2015 isn't just a dream, it's a fantasy. tesla would likely get to where it is heading just the same, same with battery and electrical cars in general. my taxpayer money could be used for something more useful if kept in the public domain - or they could have just not taken it from me in the first place.
You are obviously not familiar with Tesla's long term business plan. From day 1, Elon Musk's (Tesla's CEO) ultimate goal for the company was to produce an affordable mass-market EV.
The first model, the Roadster, was a proof of concept vehicle. The Model S is their first designed from the ground up high volume vehicle. And yes, the new technology is expensive. Remember the first cell phones? And the second high volume vehicle, the Model X (an SUV), will be expensive also. But, the model planned after that, Gen III (code name "Blue Star"), is targeted for a price point of $30,000 or hopefully less.
These early expensive "luxury" vehicles are necessary in order to fund the development of the technology. Elon Musk has had the right goals to move us away from fossil fuel based transportation all along. You just need to be patient. We'll probably see the Gen III by 2017 or so.
I am absolutely familiar with the goal. My point is it is I feel strongly it is not going to be economically feasible or as technologically competitive and attractive as a fossil fuel or hybrid based car with advancing technology and greater freedom without the limitations all electrics inevitably have.
A cell phone is not comparable to an automobile. One can track Moore's law rather well, the other is much more subject to economic constraints, resources and user preference.
If you believe in their vision, that's great - and you should buy their stock. My taxpayer money should not be put at risk for an investment in them whether it is picking a winner or loser, nor should it be used to subsidize the purchase of these cars.
Of course you don't have any problem spending my taxpayer money building and funding the 11 carrier groups we have that are dedicated to a very significant extent to protecting availability of oil and stability of oil prices among other US corporate and market benefits. It was certainly many hundreds of billions of taxpayer dollars to build them and in the tens of billions of dollars a year to operate and maintain them.
Nah...they'll still find a way to spin it and call it a bad investment, or else write it off as an outlier and go back to talking about Solyndra, or talk about how we shouldn't be picking winners and losers at all. Because while this may be a new development, it was completely predictable, and anyone that knows anything at all about Tesla knows that they have kick ass technology, kick ass designs, and a kick ass business model. Obviously Romney and Ryan didn't read the reports, or they would have picked this one as a winner from a mile away.
Yes it was predictable, as I explained above, it's not actually happening at all.
They changed the terms of the loan because Tesla was about to become non-compliant in the middle of the election race. That would not have worked at all.
I can say its better use of loan money than giving away oil subsidies. I hope it comes assembled and the batteries are included! I would love to have a green auto but I want one that can go at least 300 miles with the lights heater/AC and sound system cranked up! I think a car should be is one that runs on electricity with a turbine that charges the battery on the go or just automatically if its parked so its ready to go if its not plugged in. If the turbine ran on propane it could also be used to heat the inside saving precious battery time or you could just use the heat from the exhaust or switch from one to the other as needed automatically. Turbines can run an any combustible liquid so if made to accept any fuel would also make it more attractive. You might ask why not just run a car with just a turbine. But its been tried many years ago it worked but it take quite awhile to get them up to speed. But a small turbine could charge a vehicle very nicely.
What's even more costly... a 10 year trillion $ war in Iraq to protect our dependency on fossil fuels.
I prefer the government loaning my tax dollars to Tesla.