As we watch this solar energy episode play out with the White House....most of us are simply shaking our heads.
The game here was simple. There was a good idea in this solar energy company to start with. The honest truth is that the company could have taken a few small steps by itself....found some real capital....and built itself from the ground up. Instead, they wrote the idea up....decided to play the political trump cards....got some capital into the 2008 election, and gambled that the White House folks were as stupid as they looked. Once they said "green jobs" and "green infrastructure", they had a bunch of dimwits hooked up. They did a big tour of the White House...kept talking jobs, jobs, jobs.....and eventually got their loan all fixed up. From that point on, they simply siphoned off bits and pieces of the money.
So I will bring you to solar energy episode version 2.0. Tesla Motors. You may have heard of them....their intention is to make the first authentic electric car that can travel more than 200 miles between charges. Again, they tout "green jobs", "green infrastructure", and jobs, jobs, jobs. My guess is that they also helped with some 2008 campaign cash but the media has yet to find this part of the puzzle.
What they wanted....and got....was a $465 million loan from the government.
I paused here and looked at the actual car. You'd have to spend around $47k to make this work. That $7,500 tax credit? That's already subtracted to get to the $47k level.
There are several problems here, which has a smell like the bankrupt solar company. First, they want to manufacture these cars out in southern California. For a major manufacturer to select that region, you have to be foolish or crazy. You end up paying ten percent of your profits into state taxes or state property costs. Toss in the higher wages you have to pay to be a decent player in the local environment. You could pick Georgia or South Carolina and save at least twenty percent of your labor costs compared to California.
Why use the southern California layout to get the loan? Jobs, jobs, jobs. You sell the Democrat strategist on this neat idea of bringing in good manufacturing jobs in the region....while no one else is really doing this. It would be slightly better if they'd said they were going to manufacture the car in downtown Brooklyn, New York....at an old abandoned piano factory. This would have been a great human events story to play upon the media and the White House.
The other problem to the story? So far, there just aren't any big huge players walking up to dump big cash into the lap of the Tesla company. Daimler AG (the Mercedes folks) did a ten percent deal with the company. No one much indicates the cost factor to this but I doubt if it went over twenty million. And I also imagine that they wanted to have inside information about the batteries involved....which they will use for a future project five years down the road in Germany.
My guess is that the Tesla guys are looking at the solar energy corruption situation, and wondering how they can stretch out their life long enough to avoid an immediate connection. They obviously can't go bankrupt in 2011, and probably ought to make it through 2012 before they finally collapse in the spring of 2013 (my humble guess).
I've always been this believer in the government staying out of guessing the next trend and paying for someone's start-up. It simply doesn't work. There will be media attention....folks asking how long it will be before the bankruptcy. You smile and grin....mostly pretending to know all the fake positive talk about the future and battery-run cars. The President will come out to do a tour....just like the solar energy company....and lots of Latino guys will be hired initially for the southern California company. Someone will talk jobs, jobs, jobs.....and some lawyer is sitting there with the bankruptcy paperwork already filled out except the dates.
Life in America, 2011.