Skip to comments.Green Tesla Motors: Another day another Solyndra
Posted on 10/17/2011 2:27:24 AM PDT by Watchdog85
The "green" loan scandal grows to include yet another seemingly hopeless company.
The resignation of Jonathan Silver, the U.S Energy Departments top loan officer, over the Solyndra scandal may be the tip of the iceberg. He supervised a much larger DOE loan program that suffers from the same problems as Solyndra: over the last 18 months, the Department has awarded more than $9 billion in below-market loans to auto companies under its Advanced Technology Vehicle Manufacturing (ATVM) Loan Program.
The most troubling transaction: a $465 million loan to Californias Tesla Motors. Tesla received a loan rate of 1.6% from DOE to manufacture an all-electric car that will sell for nearly $50,000. It will not exactly be the peoples car. Tesla also builds luxury sports cars that retail for $103,000 to $128,000.
Tesla also is no simple new age car company. It is owned and financed by big donors to the Democratic Party and to Barack Obamas 2008 presidential campaign. Teslas principal owner is Elon Musk, the founder of PayPal. He has an estimated personal wealth of $672 million. His firm received venture capital from the The Westly Group, Daimler Chrysler, and from Abu Dhabi investors. The firm has partnerships with luxury sports car manufacturer Lotus and with Mercedes-Benz.
The secret to access to the DOE money is The Westly Group, run by California Democratic Party stalwart and big Obama campaign bundler Steve Westly. The former eBay executive wasnt merely a prodigious fundraiser for Obama, raising $500,000 for his presidential campaign. He also served as the presidents California campaign co-chairman. Another Obama $500,000 bundler was Solyndra investor George Kaiser and his foundation.
Westly got statewide attention in 2006 when he spent $35 million of his own money to run an ugly and largely negative race against California state Treasurer Phil Angelides for governor.
Westly is a personal friend of President Obama, and since the election has visited the White House for meetings and social parties. He privately dined with the president in February with a small group of Silicon Valley billionaires. It was called the trillion-dollar dinner.
Westly was rumored to be on Obamas energy secretary short list. When he lost out to physicist Steven Chu, the White House got him a seat on a pivotal DOE advisory committee that made recommendations to the secretary on alternative energy policies. The committee voted in favor of changes to federal rebates for all electric cars which would benefit Tesla.
Westlys Washington political connections to the White House have made him a pied piper of DOE money for start-ups. DOE records show that Westlys venture capital firm has reaped at least $500 million in DOE loans for his companies, wowing Silicon Valleys VC community.
Westly also sat on Teslas board of directors early in the car companys life.
Teslas CEO Elon Musk also has been a generous donor to the Democratic National Committee, contributing more than $120,000 over three different election cycles and $292,250 to political campaigns, overwhelmingly to Democrats.
Financial analyst Brian Krasting has called the DOE loan program free money for all electric car manufacturers at taxpayer expense. Others have called the Tesla deal a form of corporate welfare for the presidents friends. There have been complaints from alternative energy companies that the ATVM loans were awarded because of political connections.
DOE defends the Tesla loan, telling PJMedia it was sound and neutrally approved by its financial analysts. However, the DOE spokesman also acknowledged not knowing of the companys plan for a $200 million NASDAQ IPO when it awarded the firm the loan. Nor did the spokesman say DOE knew Toyota was to become its partner in the plant when DOE issued the loan.
There is a general question of competence regarding the DOE loan staffs ability to examine the 130 loan applications they received from high-tech firms. A February 2011 report by the U.S. Government Accountability Office concluded that the staff did not have adequate expertise for evaluating the green companies that were seeking the loans:
Without qualified oversight to analyze the information submitted by the borrowers and to provide technical monitoring, the ATVM program cannot be adequately assured that the borrowers are delivering the vehicle and component projects as required by the loan agreements.
Rep. Cliff Stearns chairman of the House Energy and Commerce Oversight and Investigations Subcommittee that has jurisdiction over the Solyndra scandal tells PJMedia he is launching an investigation looking at the entire program, and some specific companies.
The Model S, for which DOE awarded Tesla most of the $465 million, reportedly will sell for as much as $67,000. The company has yet to record a single quarter of profit and continues to see its own stated production schedule slip. It now promises that the Model S will be launched at the end of 2012, a year late.
Tesla says it still hopes to sell the base model for around $47,000 before governmental rebates. That still may be too steep a tag even for environmental enthusiasts.
When the White House gave a half-billion dollar loan to Tesla, President Obama lauded it as [a] historic opportunity to ensure that the next generation of fuel-efficient cars and trucks are made in America.
While on the committee, Westly supported a $7,500 instant rebate for electric car buyers. (Most federal rebates come long after a sale, when a customer files his income tax forms.) The new rule supported by Westly automatically deducts the $7,500 off the retail price of a car at the time of the sale. The regulation is now in force and will apply for all Tesla customers.
When Teslas application was before DOE loan managers in 2009, there were many indications it was not even in need of the loan. Teslas private investors included Google co-founders Sergey Brin & Larry Page, former eBay President Jeff Skoll, Hyatt heir Nick Pritzker, and VC firms Draper Fisher Jurvetson, Capricorn Management, and the Bay Area Equity Fund (managed by JPMorgan Chase). In May 2009, Daimler Chrysler took a stake in Tesla for a reported $50 million. Abu Dhabis Aabar Investments reportedly bought 40% of Daimlers investment.
Tesla is also building powertrain components for the Mercedes-Benz A Class E-Cell all-electric cars, and is working with Daimler on components for its smart car.
That year Tesla was making presentations to potential investors for an IPO. In June of 2010, Tesla officially launched its IPO on NASDAQ, which instantly capitalized the company at $226 million. The IPO underwriters were not small investment houses, but Goldman Sachs, JP Morgan, Morgan Stanley, and Deutsche Bank. The IPO, however, had troubling fine print that the company would discontinue the production of its roadster after only 1,600 vehicles had been built.
The DOE loan was also intended to reconfigure a Fremont car assembly plant partially owned by Toyota. Instead of selling its plant, Toyota became a $50 million partner with Tesla, which could have easily recapitalized the plant.
DOE says they had no inkling of the deals that were in the works when they initially approved the loan, which was announced in June 2009. DOE spokesman William Gibbons tells PJMedia that it was offered a conditional commitment in June of that year, but only learned after the issuance of the loan that Tesla was able to raise significantly more private equity, and made its initial public offering.
However, many financial analysts have seen Tesla economic prospects differently.
On automotive news website The Truth About Cars, Edward Niedermeyer wrote on February 13, 2009, months before DOE approved the loan:
How on earth is anyone supposed to believe his repeated insistence that Tesla is not in financial trouble?
Motley Fool financial analyst Sean Williams wrote:
I just cant see Tesla turning a profit anytime soon if ever! Current analyst projections call for Tesla to grow revenue by threefold in 2012 with the introduction of the Model S, but call me not so convinced. On countless occasions in recent history, Tesla has run into parts supply delays and technical snafus. Lets just say I wouldnt be shocked to see the debut of the Model S pushed back beyond the mid-2012 date the company provided.
Williams was right. Teslas Model S is now slated for release sometime at the end of 2012.
Financial analyst Bruce Krasting openly worried about the free money being given to the automakers. The loans actually are paid by the Federal Financing Bank, a bank supervised by Treasury Secretary Timothy Geithner. Geithner has doubled the size of the bank and redirected its loans from government projects like rural electrification to private sector projects like Tesla. Geithner has total control over the size and disbursements of the bank. He has no oversight. A congressional committee is investigating the bank connected to the Solyndra scandal. Krasting complained that the bank, once reserved for governmental non-profit programs, was being redirected to for-profit companies like Tesla. In September 2011, Krasting tweeted:
Who got this money? Answer: The same characters that have gotten the Free Money since O/Timmy G. took control.
Motley Fool analyst John Williams didnt pull punches when it came to Tesla:
Lets get real here. Tesla carries a market capitalization of $2.8 billion and has a net worth of less than $400 million, so its stock price is 86% air a bubble in search of a pin.
Before the Solyndra scandal broke, Tesla representatives said they were primed for a second federal loan from DOEs ATVM program. But late last month, their CEO reversed course saying they dont need the money.
Westly and Tesla were the subject of a joint investigation by the non-profit Center for Public Integrity and ABC News that ran in March of this year. They outlined the nexus between energy politics and money in the Obama administration. They reported that Westly treated DOEs loan program as his personal bank for capitalizing his portfolio of companies:
He (Westly) visits White House staff and, as a member of a government advisory board on energy policy, has the ear of Energy Secretary Steven Chu, whose department hands out the sort of seed money sought by companies in The Westly Group portfolio. He even has hosted the president at fundraisers in his Northern California home, and co-hosted events for three of Obamas most influential advisors.
The Center for Public Integrity quoted an environmental reporter regarding Westlys ability to pull strings in Washington for many companies:
One of the things the firm pledges that differentiates The Westly Group from other venture capitalists is they help companies navigate the political landscape, said Eric Wesoff, a senior analyst who specializes in renewable energy and financing for Greentech Media, which covers news and analysis about the green tech market. If the premise is that The Westly Group is able to pull some strings to get their companies federal funding, that might actually be part of his business plan.
Like Solyndra, despite the infusion of private and public funds Tesla may not be a financially successful company. Tesla has yet to see a single quarter of profit. Outside financial analysts assert they are skeptical Tesla will ever be profitable.
And like Solyndra, Tesla has been accused of poor financial management. There are charges it was running an unsustainable burn rate of $400 million in a short time. Zeev Drori, a former Tesla CEO, tried to put a stop to the financial hemorrhaging and slashed spending by ten percent. But Elon Musk reportedly didnt like this new direction he fired Drori and replaced him with himself.
Documents obtained by the Center for Public Integrity under a Freedom of Information Act request show that the ATVM program has generated internal complaints that all firms did not get the same welcome mat that Westly and Tesla enjoyed. The Center for Public Integrity reported:
One of the firms turned down for funding in that loan pool complained of unfair treatment and being ignored. In a five-page letter to Chu, dated Sept. 21, 2009, the company said it had been given no reason for its rejection and had to call the Energy Department multiple times simply to learn what happened.
DOE reviewers never even talked to the founder, inventor, engineers, project leads or primary contractors to obtain additional information, said the letter from the California electric car maker XP Vehicles, Inc. Why was staff at DOE during the course of the year positive about the outcome and never asked for additional information?
Other firms shut out from the car program have expressed similar frustration, James Taylor, CEO of Ohios Amp Electric Vehicles, said in a Q&A last week on Edmunds.com. These are companies trying to get off the ground and are just like us, starving for cash, looking for investors, Taylor said. The government money is not falling through the funnel and getting out to us.
Multiple congressional and federal investigations are now underway over DOE ethics and political corruption besetting DOE and the Treasury Departments Federal Financing Bank. The Energy Departments inspector general, Gregory Friedman, said his office has 64 open investigations centered on stimulus spending. They include the directing of contracts and grants to friends and family.
Chris Horner, an attorney with the Competitive Enterprise Institute, calls the Tesla deal corporate welfare. He tells PJMedia:
This is a handout from the taxpayers. This is standard corporate welfare. Its run-of-the-mill corporate welfare that they drape it in green rhetorical bunting as if this is different. It isnt. Its even worse because this is likely to be uneconomic.
There are three significant problems with these battery-powered cars. First, the regular citizen making $40k a year...isn’t about to put out $50k for this type of car. It’s for a computer geek who is making $70k-plus. Second, in California....you tend to drive 50-plus miles a day, so you need a place to recharge. I don’t many companies or bosses offering free electricity, so you need a meter, and you need to buy your power. Third, and final...forget about cross country trips or even 800-mile trips. So you have to have a second car for real travel.
This is the most egregious corruption I have ever witnessed in American politics.
A small plane that crashed in East Palo Alto last year, killing all three Tesla Motors employees onboard, had its propellers and engines operating normally before it hit a transmission tower and plummeted in pieces into a residential neighborhood, a federal investigative report found.
The report by the National Transportation Safety Board cites recordings made by a police gunfire detection system, which captured the plane’s final moments, in concluding that “both engines were operating near full power.”
The federal board also said both the plane’s propellers had been recovered and that “no indications of propeller failure prior to impact were found.”
Interesting...its funny how in almost every government scandal people involved with these scandals mysteriously start having accidents.
We all know this was money laundering.
Obama gives taxpayer money to big donors who give some of that money back to the Obama campaign.
The tax money is gone. Some donations were made.
However, the good news is that with all the attention, some of the donors may think twice before giving money to Obama for fear of being charged with corruption and fraud.
We must keep the pressure up and the intensity in the media so these donors are scared to give the tax money to Obama’s campaign.
Another one to watch is Fisker Automotive. They bought GM’s Boxwood Plant in Wilmington, DE for $20 million. A new plant would have cost $1 BILLION. Pushed by Old Joe Biden, DoE gave Fisker a $528 million loan. Cars are supposed to sell for around $80K. Plans are to hire 2,000 employees by 2014. They are a year behind schedule on getting cars to market.
1. Received $529 million U.S. government loan
2. Vehicles built in Finland
3. Company backed by Al Gore
4. Vehicle cost = $89,000
I went into one of those Tesla showrooms about a year ago. Nice looking cars but the electric motor was about the size of a large sewing machine. They showed pictures of the thing driving up the Rockies to a ski lodge , but for the life of me I couldn’t imagine how they’d be good in the snow. Maybe as a car for around town , but with the $100K sticker price (according to the salesman), I couldn’t imagine anyone but an evil, greedy , Wall St CEO ever buying one.
I would call it the tip of the iceberg. It is what we don’t know that is the most egregious, and I would say what we don’t know, dwarfs what we do know.
Not only is Tesla a complete boondoggle and a sinkhole of money, it is also occupying the space in the market where a real electric car company should be.
Tesla is sucking up all of the money, and producing nothing but press releases and vaporware. If Tesla did not exist, that money might actually go to a real company with a real business plan to produce real electric automobiles. But none of that can happen as long as Tesla dominates this segment.
Plugs Bide skimmed a % to cover the taxes and operating cost on his estate
Corruption is the key word, but a different meaning than I suspect you are expressing.
The behavior being reported is “criminal”.
Corruption, unlike criminality, refers to a state of thinking when criminal behavior, (an unrighteous behavior), is not first addressed in a just fashion, so that other endeavors and thinking after the criminal acts are not also tainted by the unrighteousness of the criminal act.
All mankind is corrupt after the fall in the Garden. The solution first resides in returning to perfect righteousness by means of perfect justice. Until that occurs, those who reject perfect justice simply further degenerate in their corruption. Criminality becomes a natural modus operendi in the minds of those continuing to degenerate in their arrogant refusal of legitimate authority, God’s provision, and His law.
The entire agenda of these fraudulent schemes is consequent to similar past criminal endeavors becoming an accepted as happenstance amongst those in political power.
I talked to my Auto and Aerospace "gnomes" within the last two weeks and noticed a trend. New product manufacturing seems to be going to plants that are newer and additional flexible assembly facilitites can be built, or a new facility from scratch. Not refab an old plant, it is two hard, to do that and be flexible.
My guess is like all these Green Car fantasies ( like these Left leaning arrogant B*****ds at Tesla) will run up against "reality".
That reality is it is a lot tougher to make a bunch of them identical with swapable parts that fit rather than a onesy twosey in the garage prototypes. You and I can do that with a Kit-car, bike or airplane and play Walter Mitty.
Banging Detroit and their ability to produce when you haven't done it yourself with your Silicon Valley arrogance will only get you so far.
Ya better care how they do it in Detroit, cause quite frankly you don't know how too....
You mean like Ford? :-), See this image below, this is the electric motor in the up coming Electric Ford Focus....
What you are looking at here is a Electric Drive motor that with out a CVT ( Continously Variable Transmission), by playing with the sine wave or whatever, that acts like a CVT.
This has only been reported here, and in a conversation with a Ford Rep @ the NAIAS in Jan of 011' when they described what they were doing to a EE that I was with, so it is not company top secret.
Does anyone get this? Does this do the following? ( we don't know yet..)
* Does this eliminate the transmission other than a FWD knuckle.
* Does this make a Volt Series type Hybrid more viable.
* Does this truly open the door to a true electric - hybrid drivetrain.
BTW a Hybrid gnome on a high profile program once told me the ultimate transmission for an electric would be a CVT. Combine this with how much more energy they are recovering with regenerative braking, and maybe I can finally embrace these electrified drivetrains...
The government should never pick the winners and losers. Individuals in the marketplace deciding who to give money to might take some time but the outcome will be accurate. Trust the invisible hand. Central planning always fails.
Subsidizing feel-good toys for rich people doesn’t seem like a good use of government money — except in the minds of Democrats.
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