Tesla Says Money Shouldn’t be Diverted to Bailout Car Makers
After the big three Detroit auto makers essentially had their rear-ends handed to them in a bag by Washington politicians last week, they have been scrambling to find ways to get the money they feel they need to stay alive — and their proposed solutions are making Tesla cringe.
Last year, when the US congress passed the Energy Independence and Security Act (EISA), a $25 billion fund called the “Advanced Technology Vehicle Manufacturing Incentive Program” (ATVM) was established to help new and existing auto makers re-tool their operations to bring next generation car technologies to market quickly. Just this month, the program started accepting applications for funds from interested parties.
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But in all the hubbub surrounding the downfall of the established American auto manufacturers, one of the ideas apparently being floated by the CEOs of GM, Ford and Chrysler is to convert some or all of that $25 billion into what amounts to a bailout.
Needless to say, car makers like Tesla aren’t happy about this strategy. Tesla has applied for funding from the ATVM to undertake two projects — an Advanced Battery and Powertrain Manufacturing facility and a manufacturing facility to build their upcoming five-passenger electric sedan known as the “Model S.”
So, in a Thanksgiving blog post, Diarmuid O’Connell, Tesla Motors’ Vice President of Business Development, categorically outlines how shifting any of the ATVM $25 billion into a bailout “would be an enormous mistake,” adding that “the original spirit and intent of the program is critical for the nation’s economic security – and the importance of the program is even greater given the harrowing economic climate.”
I happen to fully agree with Tesla on this one. That money is intended to rectify the problems that got the big three into trouble in the first place — that being their lack of foresight and desire for change. As New York Times contributor Micheline Maynard has said, “Detroit [has] proved yet again that it [has] not understood the psyche of American consumers.”
In other words, Detroit missed the boat and made a fatal strategic calculation that people would continue to buy larger and larger cars without nary a second thought. Does that mean we shouldn’t bail them out at all? Maybe so, maybe not… I’m still not convinced we shouldn’t save the big three in some form.
As Mitch Albom said in a Detroit Free Press article last week, if we let the big three die we let our “national spine collapse. America can’t be a country of lawyers and financial analysts. We have to manufacture. We need that infrastructure. We need those jobs. We need that security. Have [we] forgotten who built equipment during the world wars?”
Nonetheless, I don’t think the ATVM money should be used for anything other than bringing our car technologies into this century. So on this point Tesla is right. I take it a step further though and say that perhaps we do need to save Detroit, but we need to do it in a way that doesn’t penalize the car companies that have been doing it right.
Image Credit: Tesla Motors
People are surprised that this statement would come from Tasla?
The US auto industry is littered with the corpses of dead auto companies, I say add three more.
I completely understand Tesla’s opinion and agree that taxpayers shouldn’t have to pay to bail out a company that has not had the smarts to make good business decisions. I agree with gennette, that the government should invest in companies that look toward the future, like Tesla, rather than in companies that haven’t been making good business decisions.
The Big 3 continues to make big SUVs (i.e. Hummer); Chevrolet continues to make the Corvette; Dodge is making sports cars like the Viper and Challenger. And it’s these companies that the government wants to put money into?
“Yeah, If GM, Ford and Chrysler go under, everyone will shell out the $80K+ for a Tesla. Right, boys? ”
No, but if GM/Ford/Chrysler go under then 100s of small car manufacturers will take their place. Nimble, agile companies that produce cars that people actually want; CNG, PNG, Electric, Steam, who fracking knows. You won’t know because the big-three are currently suppressing innovation; not intentionally but simply through their sheer size and the subsequent barriers to entry.
What is obvious is that the big-three failed to pick the direction of the market and now they can’t change course quickly enough. The foreign companies are eating them alive. I’ve no sympathy; customers have been saying for years that we want smaller, more efficient cars. But the big-three were focused on those huge short-term profits they got from inefficient monster-sized SUVs.
Let them fail. There will be turmoil but the good workers will be picked up by cottage industries who will eventually produce desirable cars. In the meantime you can buy cars from companies which weren’t so short-sighted, like Honda. The big-three will fade into history and set an example for what happens when companies become greedy and complacent. The companies that replace them will create better cars with a faster rate of innovation than you’ve seen in 50 years.
But that will never happen if the big-three get their bailout.
The Big Three have to get out from under their horrible labor agreements. Each car has an added cost of thousands of dollars to pay for their union benefits and retirees. Other companies do not have to pay that added expense.
The Big Three should go into bankruptcy and restructure. It works for the airlines every few years so why not them?
Forget what the super liberal press is feeding you and do some research on just why the former “Big Three” have had the problems that they now have. Among these problems was the government’s support for one union to supply labor for all three auto companies, which gave the unions the ability to strike one company while working at the other two to maintain “strike funds”. At the same time the auto companies were not allowed to present a unified bargaining entity by locking out the employees of the non-struck companies even though there was not labor contract in force. Doing so was determined to be an illegal “CARTEL”. The result was exceptionally high benefits in both wages and in health care provisions; that means very high costs. At the same time the auto companies had to bargain away jobs that had become obsolete. They could not just eliminate these jobs. The solution was effectively a wage for life, which cost is incorporated into the cars that they build now.
Government regulations designed to prevent idiots from committing suicide with their cars created more and more “safety” features, while the requirements to learn how to drive before you were allowed to drive legally continued to drop. Then the government decided to assist the insurance companies with loss control by requiring that cars became damage proof in “small” collisions. The result was again more weight and even lower fuel mileage. And don’t try to tell me that high performance caused the poor fuel mileage. My ‘56 Chevy turned the 1/4 mile in 14 seconds at just under 100 mph. It only got 17 MPG, but then it was among the lightest of American cars at the time. I actually got slightly better mileage than was normal for Chevrolets of the time. The mileage came without benefit of overdrive or a low numerical axle ratio.
Don’t get me wrong. The auto companies made enough mistakes on their own, but many of them were a result of the mostly Democrat Congresses of the time. These same Congressmen are the ones who created our “safety requirements” that prevent the great cars that these American car companies are building overseas from being imported into the U.S.
The U.S. auto companies need to be bailed out, but the bail out should be from the horrible labor contracts that exist in Detroit, and replacement with the labor contracts that exist in the foreign auto companies elsewhere in the U.S.
The problem can not be solved while maintaining the existing labor contracts and method of negotiation.
A couple weeks ago, an article popped up regarding the Honda plant that was manufacturing in the same part of Michigan as the other big 3 plants. The difference is that Honda was doing well, their workers payed well, and actually gave that small town an economic boom soon after that plant opened. The big 3 have not taken a page from Honda or any other successful automaker. Americans are becoming more and more aware that we can’t survive on oil alone, we need to look towards the future. Unfortunately, it took the big 3 too long to realize this, if that.
This isn’t as complicated as everyone makes it seem. Its very simple actually. Let the big three fail. And worry not, the other big 3 will take over. So, let GM, Ford and Chrysler fail, and Honda, Toyota and and the rest of the world will take over. All these companies manufacture in America, they pay US workers a great salary and… wait for it… they make much much better cars.
Yes if the big 3 fail it will be hard for a bit, but people still need cars and the other companies will be happy to fill in the gap.
See… simple!
Why hasn’t anyone offered this as an idea:
- bail GM, Ford, Chysler out ONLY that they go under the ownership of Telsa (other like them)
- Allow a proper coordination with Electricty Sector to bring all of these industries into sync
- And Telsa/others would continue to win in that business cost reduction
If there’s problems with many issues that ARE related - then integration / sysmatic re-coordination will give a Win/Win/Win for all.
My next automobile purchase will be electric. After that, I will never buy gas for an automobile again. I’m tired of oil companies ripping off the consumer.
the only problem with electric that there is no cheap car that can go high way speed.