Bailout Watch 564: Detroit Gets Testy Over Tesla DOE Funds

by Edward Niedermeyer

Published: June 26th, 2009

bailout watch 564 detroit gets testy over tesla doe funds

Manny Lopez has a cow about Tesla’s $465 million Department of Energy loan over at the Detroit News, concluding that tax dollars shouldn’t “be spent, propping up millionaires and billionaires, who, unlike their Detroit CEO brethren, fly in private planes when they’re not toying around town in their electric cars.” And why is it that Detroit’s CEOs don’t fly on corporate jets? Oh, right. Sweet Pete DeLorenzo lays into Tesla as well, saying it got the loans “so that it can become a real car company instead of a boondoggle that makes outrageously overpriced battery-eating kit cars.” MLive‘s Rick Haglund even figures Elon Musk’s divorce-by-blog reflects an unseriousness that makes his firm undeserving of taxpayer support.

And it’s not like the Detroit team doesn’t have a few valid points amidst the factual errors, misleading turns of phrase and all-out smear. Tesla is a $100K sportscar manufacturer that is trying to branch into the $50K sports sedan game. That’s not the most egalitarian business model, which makes it an easy political target (green halo aside). But notice that none of the Motown cheerleaders are arguing against loans in general. Their point is that the money should go to the Detroit firms. But is a $40K Volt, or an off-the-shelf, Austrian-engineered Focus EV more patriotic or folksy? There’s no moral high ground in sight here, folks.

Edward Niedermeyer

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4 of 5 comments

Guyincognito on Jun 26, 2009

Maybe they are being somewhat hypocritical but I completely agree with them. Tesla has virtually no technology of their own. They bought AC Propulsion battery tech and had Lotus do most of the engineering for the Roadster. They have developed software and revised the battery pack, but a volume automotive manufacturer, this does not make. It seems to me that the development of the Model S will be contracted out to Mercedes, and thus Mercedes will get the bulk of this money. Do we really need to be paying Mercedes to build green cars for rich people while simultaneously padding Elon Musk's ego and bank account?

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No_slushbox on Jun 26, 2009
guyincognito: This retooling subsidy is a classic externality internalizing subsidy, assuming that global warming is an externality. Private industry, which would otherwise not have enough incentive to overcome the cost of developing alternative energy technology, is having that cost reduced with no interest "loans". A $50,000 dollar car is the first step in making the technology cheap enough for all cars, and I don’t see Detroit coming up with any electric cars for the masses. The Korean battery using Volt is targeted in the $40s, and all Chrysler can come up with is a rebodied Lotus like the original Tesla. I don't agree with the retooling subsidy, I say raise the gas tax, actually use the money for roads, and get rid of toll roads and revenue raising speed and red light cameras. Along with providing legitimate, instead of “got ya” revenue, a gas tax would also provide alternative energy incentives without the government paying out subsidies. But the retooling subsidy is much less ridiculous than the > $100 billion that is being spent to simply soften the certain failure of Chrysler and possible failure of GM. And Tesla is as deserving of it as any Detroit automaker.

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Derm81 on Jun 26, 2009

Why is Manny complaining? All three companies do a good amount of business in the Detroit area. Nissan has a good-sized engineering facility and Tesla has an operation in or near Pontiac. At least SOME of those dolalrs will come into the Detroit area. Manny should take a breather.

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SCE to AUX on Jun 29, 2009

Tesla can't be compared to GM and C, each of which is burdened by decades of bad management, poor quality, brand engineering, union bullying, and now political intrigue. Tesla is actually selling real cars, not vaporware like teh Volt. And whether Tesla invented all of its own technology is irrelevant; nobody else has put it together the way they have. The US could have funded/seeded several "upstart" car companies for the $80 billion that's been wasted on GM and C.

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