Re: Americans are poor
U serious?
eek:eek
yes I am. my bad though..... it was only 400 million :willy_nilly:
It was in an article in yesterdays detroit news.
Commentary: California wants to raid Big 3 bailout cash for green cars | The Detroit News | detnews.com
Thursday, December 4, 2008
Commentary: California wants to raid Big 3 bailout cash for green cars
Taxpayers should be wary of bailing out unviable electric carmaker
Henry Payne
Think the $25 billion is to help save the Big Three automakers and preserve manufacturing facilities essential to national security? Think again.
Detroit automakers' best hope for Washington aid is a bipartisan plan to speed the release of $25 billion in already-approved loans under the Energy Independence and Security Act (EISA). But long-simmering hostilities between the California and Michigan delegations on auto issues threaten the deal. California legislators want that money to subsidize their own Silicon Valley-based auto industry, which they argue is the future of American transportation.
The Detroit Three automakers have driven the perception that the $25 billion package to help pay for "retooling" factories to make more fuel-efficient cars under increased gas mileage standards and a possible additional $25 billion bridge loan are rescue packages meant for Detroit alone. But a letter from U.S. Sen. Diane Feinstein, D-Calif., on Thanksgiving Eve makes clear what few taxpayers know: The billions in auto loans are a giant honey pot intended for any auto manufacturer in the nation.
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In fact, Tesla Motors, a struggling San Jose start-up manufacturer of electric cars in Feinstein's back yard, has already applied for $400 million in EISA loans to build a new plant for making a luxury $60,000, battery-powered family sedan.
So while some members of Congress tut-tut Detroit executives for wasting money on private jets, Washington is entertaining taxpayer-financed loans for an automaker that caters to Silicon Valley millionaires.
Once synonymous with Detroit, the "American auto industry" now depends on your geographical perspective. To Southerners, it's foreign transplants like BMW and Hyundai. To Midwesterners, it's General Motors, Ford and Chrysler but also Honda and Toyota. And to the West Coast, it's alternate-fuel startups like Tesla Motors and Fisker Automotive.
That is why Feinstein wrote Senate Majority Leader Harry Reid: "I do not support disadvantaging the next generation of American automobile companies in an effort to save the first generation."
Feinstein's letter comes in response to a Senate plan crafted by Michigan Democrat Carl Levin -- backed by the Bush administration and a bipartisan group of senators -- to use existing funds to help Detroit's automakers almost exclusively. In speeding his plan, the Senate veteran added a provision stipulating that the federal government "shall make loans (to carmakers) that have operated a manufacturing facility throughout the 20-year period ending on the date of enactment of this act." In other words, only Detroit automakers (and Honda's Marysville, Ohio facility) need apply.
Powerful Democrats like House Speaker Nancy Pelosi and Feinstein beg to differ. Their state's political and business class speaks contemptuously of Detroit's "dinosaurs." They believe Silicon Valley-produced alternatives are the answer, and they demand equal access to federal money to prove it.
The original intent of the $25 billion was about more than helping the Detroit Three cope with the costs of Washington's expensive new fuel-mileage mandate, Tesla Vice President of Business Development (and ex-Bush staffer) Diarmuid O'Connell points out. It was also about accelerating a new American auto industry beyond Detroit.
The program, O'Connell writes, "specified that the Department of Energy should provide loans to new and existing automakers and suppliers to encourage development and speed delivery of next-generation cars."
Indeed, Tesla was the first applicant for the loan money, requesting $400 million on Nov. 16 -- three days after the program became official -- to fund its premium "Model S" sedan and an advanced battery facility.
The trouble with government subsidies, however, is that they shield emerging companies from market demands. A closer look at Tesla reveals a high-tech company in deep financial trouble.
According to a Nov. 3 issue of Business Week, Tesla looks "a lot like the Motor City."
The magazine found that, until "a few weeks ago," Tesla had "dreams of one day producing a line of electric vehicles for every purse and purpose. Then the world changed. ... Investors, fazed by the credit crunch, were suddenly demanding tougher terms. (Tesla founder Elon Musk) began retrenching, cutting costs and postponing Tesla's second model, the $60,000 Model S sedan."
The financing crunch is the second crisis Tesla has endured in a year. Its first electric, a highly anticipated $100,000 sports car, is over-budget by $40,000 per car and Tesla has delayed the launch by six months to find a way to make it profitably.
Is its federal loan application seed money -- or bailout money? Auto analyst James N. Hall sees a grim future for the company: "If the market wants (electric cars) in the number Tesla is talking about," he told Business Week, "a larger auto company will bury them on cost."
Taxpayers already may be on the hook for decades of bad decisions by U.S. automakers. Do they also want to throw money at California startups that have yet to prove their market viability?
Henry Payne is an editorial cartoonist and writer for The Detroit News. Contact him at hpayne@detnews.com.
