While $25 billion in low-cost federal loans keeps General Motors (GM), Ford (F) and Chrysler churning out SUVs through the econalypse, the wheels are coming off cleantech car company Tesla Motors. Without access to the same sorts of loans given its Detroit colleagues, the country’s leading electric car maker is delaying production of its Model S sedan, sacking an unspecified number of employees and shuttering two offices. “These are extraordinary times,” Tesla CEO Elon Musk wrote in post to the company blog. “The global financial system has gone through the worst crisis since the Great Depression, and the effects are only beginning to wind their way through every facet of the economy. It’s not an understatement to say that nearly every business will be impacted by what has unfolded in the past weeks, and this is true for Silicon Valley as well.”
A couple of thoughts. First, the federal loans are specifically for advanced technology. They have nothing to do with “churning out more SUVs,” which have, in any case, fallen out of fashion.
Also, while a lot of us in the business are pulling for Tesla (everyone loves an underdog) most of us know that they are biting off a lot with the promise to build a high volume car from scratch. This is an industry where designing something as simple as a side airbag system can cost millions, and a recall, should you get it wrong, can cost millions more. Multiply that by all the complex systems in a vehicle that have to work flawlessly for 20 years and 200,000 miles, and you start to appreciate the tough path faced by any startup.
The traditional automakers are conservative for a reason — customers demand products that are well designed, inexpensive, and work for decades with almost no maintenance. Try parking your laptop outside in the snow overnight and see how well it starts in the morning.
I hope Tesla can restructure and keep moving ahead.
Cadillac Escalade Hybrid ring a bell? Where’s the advanced technology in that? That’s just chroming the same old turd.
It doesn’t seem that Ford or GM’s engineering departments are constrained by requirements for parts lasting for 20 years and 200,000 miles. At least they’re not alone – VAG doesn’t seem to care much for longevity requirements either.
Additionally, those “advanced technology” loans are allowing GM and Ford to divert money away from their development budget into other parts of the respective companies. Tesla, again without those loans, stands at a significant disadvantage.
Tesla hardly deserves a federal loan or loan guaranty. More importantly, the government OWES DETROIT!
Yes OWES!
Why?
Decades of unfunded U.S. government meddling in the U.S. light vehicle market have nearly killed Detroit from thousands of cuts.
While the Japanese invaders have been able to take advantage of “right to work” state laws which dramatically lower their labor and “legacy” costs, the Detroit 3 are saddled with expensive labor unions imposed upon them through 1930s Federal labor policies.
And in the 1970s, when it came time to “reinvent” the car because of the unfunded mandates of the Clean Air Act and Corporate Average Fuel Economy standards, Detroit bore the lion’s share of the development costs.
(Because the original standards weren’t attribute based, the Japanese invaders were able to sell technologically crude small cars until Detroit had perfected the large vehicle compliance technology)
Unfunded U.S. Government mandates over the past two decades forced Detroit into a short-term shift into trucks, vans and SUVs to maintain some profitability and respond to market effects. Just because Washington D.C. forced smaller cars in the 1980s didn’t change the fact that Americans needed and wanted larger and more capable vehicles. But Washington’s policies dictated that these vehicles simply couldn’t be automobiles.
The current fuel price spike is the result of a “perfect storm” of short-sighted Federal policies.
Liberal U.S. government trade policy with China, and other far Eastern nations has resulted in a huge increase in petroleum consumption outside of the U.S. The U.S. Environmental Protection Agency alterations of the formulas for gasoline and diesel have drastically increased the costs of refining transportation fuels. Expansion of commercial air travel has also increased the pressure on fuel prices. Meanwhile, the Feds have blocked construction of new refineries for the past two decades. Congress has refused to allow meaningful development of new off-shore and Alaskan petroleum sources. America has also lagged in development of natural gas, coal and oil shale alternatives. Moreover, the War in Iraq has undoubtedly increased instability and speculation in the world oil markets.
As a result, Ford Motor Company has LOST “$23.9 billion in the past 2 1/2 years and has had to mortgage its assets to stay in business as the U.S. auto market has shifted away from profitable trucks and sport utility vehicles to more fuel-efficient models.”
On top of that, the Federal Government has now imposed ONE HUNDRED BILLION DOLLARS ($100,000,000,000.00) or more of new, unfunded fuel economy and greenhouse gas emissions mandates in the latest round of regulatory revisions. These new standards will kill off all of the sorts of vehicles that Detroit is best at building and will force the entire light vehicle market onto the playing field of the Japanese invaders.
ONE IN TWELVE U.S. JOBS STILL DEPENDS ON AMERICA’S AUTO INDUSTRY.
Not too many jobs depend on the speculative Tesla start-up
You may not personally like the Escalade, but the fact is that large SUVs are the vehicle of choice for VIP transportation (just as massive luxury sedans are in the UK, Germany, Japan, etc.) The 2-mode hybrid system makes the city fuel economy of the Escalade comparable to that of a mid-size car. If that is not a good use of hybrid technology, I am not sure what is.
tesla was always more of a pet project for bored millionaire elon musk
now that he sees the real cost of playing carmaker he’s retreating
his hobbies of rocketships and carmaking are just too expensive without each generating hundreds of millions of profits annually, which each won’t ever do
to play in those industries requires billions of cash in pocket, not mere hundreds of millions
John Paczkowski has been poking fun at the tech industry and the personalities that drive it since 1997. From 1999 to 2007, he wrote the award-winning tech news Web log Good Morning Silicon Valley for the San Jose Mercury News, Silicon Valley's daily newspaper. Read more »
Here is a statement of my ethics and coverage policies. It is more than most of you want to know, but, in the age of suspicion of the media, I am laying it all out.
While the technology behind the Telephone is new, the design is reassuringly old-fashioned, reminiscent of a phrenologist’s horn or ear-candle in form. We found the experience far more comfortable than the one we had with the Telegraph.
12:58 AM: Breakfast: Two schools of fish from Tokyo Bay. Calories: 782,000. How I was feeling when I ate this: confused, irradiated, hating my size. 11:37 AM: Exercise: “Taxi Stomp” (alternating legs, for 30 blocks). Calories burned: 148,900,183.
1983. The Beatles announce their first tour in thirteen years, but likewise announce that Michael Jackson will be going on tour with them as a one gigantic mega-concert event.
While $25 billion in low-cost federal loans keeps General Motors (GM), Ford (F) and Chrysler churning out SUVs through the econalypse, the wheels are coming off cleantech car company Tesla Motors. Without access to the same sorts of loans given its Detroit colleagues, the country’s leading electric car maker is delaying production of its Model S sedan, sacking an unspecified number of employees and shuttering two offices. “These are extraordinary times,” Tesla CEO Elon Musk wrote in post to the company blog. “The global financial system has gone through the worst crisis since the Great Depression, and the effects are only beginning to wind their way through every facet of the economy. It’s not an understatement to say that nearly every business will be impacted by what has unfolded in the past weeks, and this is true for Silicon Valley as well.”
Comments
A couple of thoughts. First, the federal loans are specifically for advanced technology. They have nothing to do with “churning out more SUVs,” which have, in any case, fallen out of fashion.
Also, while a lot of us in the business are pulling for Tesla (everyone loves an underdog) most of us know that they are biting off a lot with the promise to build a high volume car from scratch. This is an industry where designing something as simple as a side airbag system can cost millions, and a recall, should you get it wrong, can cost millions more. Multiply that by all the complex systems in a vehicle that have to work flawlessly for 20 years and 200,000 miles, and you start to appreciate the tough path faced by any startup.
The traditional automakers are conservative for a reason — customers demand products that are well designed, inexpensive, and work for decades with almost no maintenance. Try parking your laptop outside in the snow overnight and see how well it starts in the morning.
I hope Tesla can restructure and keep moving ahead.
Posted by Tom Wilkinson at October 17th, 2008 at 7:45 amTom,
Cadillac Escalade Hybrid ring a bell? Where’s the advanced technology in that? That’s just chroming the same old turd.
It doesn’t seem that Ford or GM’s engineering departments are constrained by requirements for parts lasting for 20 years and 200,000 miles. At least they’re not alone – VAG doesn’t seem to care much for longevity requirements either.
Additionally, those “advanced technology” loans are allowing GM and Ford to divert money away from their development budget into other parts of the respective companies. Tesla, again without those loans, stands at a significant disadvantage.
Posted by Geoff Davis at October 17th, 2008 at 9:08 amTesla hardly deserves a federal loan or loan guaranty. More importantly, the government OWES DETROIT!
Yes OWES!
Why?
Decades of unfunded U.S. government meddling in the U.S. light vehicle market have nearly killed Detroit from thousands of cuts.
While the Japanese invaders have been able to take advantage of “right to work” state laws which dramatically lower their labor and “legacy” costs, the Detroit 3 are saddled with expensive labor unions imposed upon them through 1930s Federal labor policies.
And in the 1970s, when it came time to “reinvent” the car because of the unfunded mandates of the Clean Air Act and Corporate Average Fuel Economy standards, Detroit bore the lion’s share of the development costs.
(Because the original standards weren’t attribute based, the Japanese invaders were able to sell technologically crude small cars until Detroit had perfected the large vehicle compliance technology)
Unfunded U.S. Government mandates over the past two decades forced Detroit into a short-term shift into trucks, vans and SUVs to maintain some profitability and respond to market effects. Just because Washington D.C. forced smaller cars in the 1980s didn’t change the fact that Americans needed and wanted larger and more capable vehicles. But Washington’s policies dictated that these vehicles simply couldn’t be automobiles.
The current fuel price spike is the result of a “perfect storm” of short-sighted Federal policies.
Liberal U.S. government trade policy with China, and other far Eastern nations has resulted in a huge increase in petroleum consumption outside of the U.S. The U.S. Environmental Protection Agency alterations of the formulas for gasoline and diesel have drastically increased the costs of refining transportation fuels. Expansion of commercial air travel has also increased the pressure on fuel prices. Meanwhile, the Feds have blocked construction of new refineries for the past two decades. Congress has refused to allow meaningful development of new off-shore and Alaskan petroleum sources. America has also lagged in development of natural gas, coal and oil shale alternatives. Moreover, the War in Iraq has undoubtedly increased instability and speculation in the world oil markets.
As a result, Ford Motor Company has LOST “$23.9 billion in the past 2 1/2 years and has had to mortgage its assets to stay in business as the U.S. auto market has shifted away from profitable trucks and sport utility vehicles to more fuel-efficient models.”
On top of that, the Federal Government has now imposed ONE HUNDRED BILLION DOLLARS ($100,000,000,000.00) or more of new, unfunded fuel economy and greenhouse gas emissions mandates in the latest round of regulatory revisions. These new standards will kill off all of the sorts of vehicles that Detroit is best at building and will force the entire light vehicle market onto the playing field of the Japanese invaders.
ONE IN TWELVE U.S. JOBS STILL DEPENDS ON AMERICA’S AUTO INDUSTRY.
Not too many jobs depend on the speculative Tesla start-up
Posted by Lane Fast at October 17th, 2008 at 9:14 amYou may not personally like the Escalade, but the fact is that large SUVs are the vehicle of choice for VIP transportation (just as massive luxury sedans are in the UK, Germany, Japan, etc.) The 2-mode hybrid system makes the city fuel economy of the Escalade comparable to that of a mid-size car. If that is not a good use of hybrid technology, I am not sure what is.
Posted by Tom Wilkinson at October 17th, 2008 at 9:15 amtesla was always more of a pet project for bored millionaire elon musk
now that he sees the real cost of playing carmaker he’s retreating
his hobbies of rocketships and carmaking are just too expensive without each generating hundreds of millions of profits annually, which each won’t ever do
to play in those industries requires billions of cash in pocket, not mere hundreds of millions
a million ain’t what it used to be
Posted by Sam Harrison at October 17th, 2008 at 1:38 pm