Posted by Tina
The Detroit News has revealed that California Senator Diane Feinstein will not support the auto maker bailout unless California green carmakers get a piece of the bailout pie:
“I do not support disadvantaging the next generation of American automobile companies in an effort to save the first generation.”
The particular company in question is Silicon Valley carmaker Tesla Motors, a company that has already applied for $400 million in EISA loans to build a new plant for their luxury $60,000, battery-powered family sedan. They insist that the original intent of the bailout legislation was to help the big three meet the big price tag of government fuel-mileage mandates but also to encourage auto makers involved in the new alternative vehicles.
Im not for the bailout. I think the companies should go through the chapter 11 process that the government set up for troubled businesses. Im also against the government subsidizing start up alternative companies. Henry Payne points out the fundamental problem:
Commentary: California wants to raid Big 3 bailout cash for green cars, by Henry Payne
** 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.” **
I keep thinking about the original Hondas. They were small, energy efficient and affordable…the Japanese were serious about getting into the auto industry. What serious businessman today creates a $100 thousand sports car as its initial offering? Well, a businessman with a big bloated ego and the mind of a child. These people arent interested in providing alternative (green) cars for the masses…they are great big boys playing with their great big toys. Feinsteins wrinkle will add to government involvement (one of the reasons the Big Three are now failing) and cost taxpayers and customers even more. We may in the end be forced to hunt for car bargains in old barns!