The U.S. Department of Energy announced today the first installment of loans to promote clean energy. A total of $8B will be handed out to Ford, Nissan and Tesla in hopes of jump starting efforts to produce electric vehicles as well as cleaner internal combustion drivetrains.
Ford will receive $5.9B to to "help finance numerous engineering advances to traditional internal combustion engines and electrified vehicles." The money will also be used to convert two trucks plants into car plants.
Nissan is getting $1.6B to help defray the costs of producing an electric car and battery packs at its Smyrna, Tenn. manufacturing plant.
And finally, Tesla will receive $465M to help develop and build its Model S sedan as well as the production of battery packs in a separate facility.
For the record, GM and Chrysler were not eligible for the program because of their bankruptcy filings. The loan program specifies that any company receiving money must first prove its viability as a stand alone company separate from the loans. How Tesla, which is currently not profitable, got around this provision isn't clear.
So what do you think? Is this a good way to spend federal stimulus money?
1487 says:
08:14 AM, 06/23/09
CA is a powerful state and politicians and celebs who hate Detroit want to see them succeed. This was a no brainer- hand over money to a company that employs a few dozen folks and makes car for the rich. Remember, Letterman wanted to know why GM couldn't be as successful and innovative as Tesla. I mean they have sold 500 cars or something similar so they are obviously hugely successful.
bankerdanny says:
11:07 AM, 06/23/09
I don't have a problem with federal dollars used this way. Although I share IL confusion over how Tesla qualified.
Although, I would want some limits on the ability of the participants in the program to patent any innovations developed using government money.
wrinklebump says:
11:09 AM, 06/23/09
Tesla's a media darling, no doubt. Its founders were on the cover of Forbes or something last year.
Its capital will run out eventually.
fuhteng says:
11:50 AM, 06/23/09
Tesla gets money for not making cars...? Awesome! I want $465 million from the government for sitting around yapping.
cwc1 says:
04:49 PM, 06/23/09
All these give away programs just dilute our dollar even more, so this, along with many other excuses, is not a good use of taxpayer funds. And we will be paying for it for years and years to come.
estreka says:
09:09 AM, 06/24/09
At least this money is going toward our future, as opposed to the vast majority of bailout funds.
1919diesel says:
09:50 AM, 06/24/09
Folks, these are LOANS. That means they eventually have to be paid back (not to mention, the automakers will probably have to pay a low interest rate in the meantime). This is NOT a "bailout"... this is a substitute for credit from private sources, to encourage the automakers to INVEST in a somewhat risky proposition (moving from 100% gasoline internal combustion to some electric propulsion drivetrains). If not for these funds, the automakers would A) NOT have the $$ to invest, B) NOT take the risk to convert to electric, and C) NOT put $$$ (capital invsetment) into their U.S.A. plants.
I work in Finance for a large US manufacturer. This type of program is good for the automakers, but it's really a good use of $$ by the government - LOANS, not bailout $ or tax cuts or war spending or welfare programs. The $$ invested in USA factories & engineering programs creates jobs, especially in hard-hit auto industry. The taxpayers will be paid back, with interest (at least by Ford & Nissan, we'll see if Tesla is around in 10 years).
jkp1187 says:
03:12 PM, 06/25/09
Folks, this is nothing more than corporate welfare, pure and simple. Sure, these companies are supposed to pay back the money (although ask the creditors of GM and Chrysler how that works out sometimes,) but there is still the opportunity costs of the $25,000,000,000 given to Ford alone, let alone the billions lavished on Tesla or Nissan (which isn't even an American company, for pity's sake.)
As a former loan officer for a Fortune 250 bank and an attorney familiar with large transactions, I can say that this type of program is bad for America. The government is already $1,800,000,000,000.00 in the hole for fiscal 2009. The money it's spending this year is going to be confiscated from you either through taxation or inflation at some point. Think of the insanity of this: we're borrowing money from China to give a government-backed loan to a company headquartered in Japan? To a Detroit company that's holding its own, but still not out of the woods yet? Or to a boutique company run by a carnival barker who sells playthings to the idle rich? This is insanity!
And I always find it amusing that the people standing up and saying we need to invest taxpayer money on their pet projects never seem to be willing to invest their OWN money in these feel good projects.
If funding Tesla, Ford, or Nissan to develop electric cars is such a good investment, why aren't investors beating a path to their respective doors to do so?