malcolm

Huh?

Autocar - Tesla asks for a bail-out

dpeilow

BBC NEWS | Business | No agreement for US car bail-out

BBC NEWS | Business | Lack of investment clue to Detroit's demise

BBC NEWS | Business | Detroit hit as car firms beg for bail-out

graham

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.

dpeilow

Exactly - it has to be a level playing field, regardless of the companies' size or location.

Also:

Automotive World - US: Tesla Motors reported to be asking for state aid

KLIV - TESLA MOTORS WANTS SOME OF BAILOUT PACKAGE

vfx

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

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vfx

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.

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WarpedOne

This man deserves a beer. Very rational approach.

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Bradleybang

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).

Chris H.

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.

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