Slashdot Mirror
Tesla Motors Shaken Up, Laying Off
tjstork writes "Tesla Motors, the darling of technorati for its high performance electric car, may be about to go belly up. Venture capital is cut off, layoffs are under way, and construction plans are being stretched out. Elon Musk has ousted the CEO and taken the reins, blaming the global credit crunch."
Tesla isn't going belly up. They are waiting with further developing their Sedan until they can get a cheaper loan. next year or so.
People who think they know everything are a great annoyance to those of us who do.
their product takes time to work out the lumps because their pioneering. The lure of the product was that Tesla was doing this because other companies wouldn't and someday that'd be big.
In the last few weeks the feds kicked in $25 Billion (with a B) to the plain-ole auto companies to compete with them. That's more funding than Tesla will ever get even if they made a profit ... VCs are jumping ship.
Yes...the demand is so very limited that they have preorders for every single car that's scheduled to roll off the assembly line till 2009.
Demand is not the issue at all.
The issue is that they cannot get loans. This means that their only way to survive is to become profitable now as opposed to take out loans that they'd fully be able to repay later.
In Soviet Russia, the television watches YOU!
Ford and GM going belly up wouldn't magically cause them and their billions of assets, be it physical or intellectual to disappear.
What you'd have is companies breaking away from the main brand and being sold off. Ford would let Mazda go, GM Saab and so on.
What would die would be the GM/Ford brand names along with the pension plans and other UAW union benefits. Which frankly is a good thing for the US auto industry in the long run.
In Soviet Russia, the television watches YOU!
Actually, the military industry sustained growth. In fact, even when the US was an autarchy between WW1 and WW2 the economy grew.
Two things to remember: a) the rest of the world was in the great depression too, b) engaging in a huge war got us out by spurring heavy industry to create jobs and produce war machines, bombs, and bullets.
Detroit big three and bailouts
Your idea is correct but PLEASE pick a better example to illustrate it with. Betamax was more expensive and had much shorter recording time per tape. For most consumers, these disadvantages very rationally trumped its higher video resolution.
FATMOUSE + YOU = FATMOUSE
"The war saved the economy" is one of those fascinating "facts" that gets repeated constantly but which simply doesn't hold up if you look at it closely.
Consider a similar situation: the government places orders for all sorts of war supplies. Tanks, planes, food, ammo, etc. They all get loaded up on trucks and trains and taken to sea ports. At the ports they are loaded onto cargo ships. Once full, the ships leave port, sail out to sea, and shove everything into the ocean.
And just for good measure, a large fraction of the ships themselves are also sunk.
The remaining ships come back for more, and the shipyards build replacements for the sunken ships.
Economically, this situation is identical to what you experience during a major overseas war such as WWII. But somehow, shoving thousands of tanks and planes into the ocean, and tons of food and ammunition right behind it, doesn't seem like a net gain. In fact, it seems an awful lot like a net loss.
Maybe extra government spending on the war stimulated the economy. But nothing about that stimulus required a war, and indeed without the war it could have been done much better and less wastefully.
If you mod me Overrated, you are admitting that you have no penis.
Tesla's business plan involved selling the Roadster as a luxury item to raise funds for designing lower priced (and larger production run) electric cars. See planned models on Wikipedia. Note that at time of writing Wikipedia still gives a 2010 date for the Model S, and the article says that is being pushed back about six months into 2011.
... said company founder Elon Musk, who also announced that he will assume the role of chief executive officer. He replaces Ze'ev Drori, who becomes vice chairman and continues as a board member.
Looks like the old CEO is still there...
VC's don't have a mixed pool of assets from which to operate, nor do they operate on loans in any traditional sense. If you're at a Venture backed company right now, like Tesla, it may be useful to know how the Venture Capital system works:
First, the people we call "VC's" are really the "General Partners" (GP's). They're the people the companies meet with and the ones who ultimately decide how much to invest in which companies. They'll have a variety of "Associates" or "Venture Partners" around helping out, but the "General Partners" are the ones who decide where the money goes.
The money itself doesn't come from loans, per say, nor is the money sitting around in some kind of mixed asset class. VC's don't have money laying around in a bank somewhere, at least not a lot of it. The money comes from "Limited Partners" (LP's). The LP's could be very high net worth individuals, they could be pension funds, they could be insurance groups, they could even be "funds of funds" (funds created just to figure out which VC's to put money into). A typical VC will have a mix of all of the above in their LP pool.
So, if a VC has a "$250 million dollar fund" that doesn't mean that everyone wired over a total of $250MM when the fund was created and that the VC's draw he money down. What it means is that the VC's have $250MM to call on when they make an investment. So, VC-Guys decide "hey let's put $10MM in this startup", they make a "capital call". That's when they tell their LP's to put in their pro-rata share of the $10MM they decided to invest. The LP's move the money into a single account, that account makes the investment on behalf of the Venture Capital group. When they've spent the whole $250MM (or whatever) they have hopefully already raised another fund to start investing from.
It's that last part that should be scary to any of us dependent upon the Venture Capital market doing its thing. Guess what all those pension fund and insurance groups are doing right now? I'll tell you what they're NOT doing, they're NOT showering VC's with new commitments for new funds. Even worse, some of them are so upside down that some LP's can't make their capital calls. This mean that the VC calls and says "your pro-rata share of the $10MM is $$684k" and the LP says "...er, I don't got it. Sorry". So the VC's suddenly have less money to invest than they thought.
This results in a lot of VC's sitting on their hands and not investing in big rounds of later stage companies like Tesla (or maybe the company you're at now). This isn't a bad idea for them either, the latter stage financing that they counted on their companies getting (debt based instead of equity based) is largely gone too. So they build a company up to the stage they used to build it up to and there's no one there to take it to the next level. The right thing to do is to get a company to cash-flow positive ASAP, and then worry about growth later when there is outside money available to help you do that. TFA says "the company's goal is to become cash-flow positive in six to nine months", presumably (hopefully?) they have access to enough cash to pull that off.
My favorite quote doesn't fit into 120 characters. Now no one will like me.
Comparing the whole of Germany isn't quite the same. West Germany has comparable, and even lower unemployment rates than the United States, but the leftovers of East German policies are still affecting the economy as a whole. Government subsidies are still flowing East, just as the Northeast and West coast pay for the infrastructure of the rest of our country.
Even with a former communist bloc attached to it, Germany has lower poverty levels, better education, and equal access to health care. Oh, and when polled, the Germans are far more satisfied with their health care than Americans are with their own, despite paying less than half of what we pay.
Parable of the Broken Window
The parable describes a shopkeeper whose window is broken by a little boy. Everyone sympathizes with the man whose window was broken, but pretty soon they start to suggest that the broken window makes work for the glazier, who will then buy bread, benefiting the baker, who will then buy shoes, benefiting the cobbler, etc. Finally, the onlookers conclude that the little boy was not guilty of vandalism; instead he was a public benefactor, creating economic benefits for everyone in town.
Bastiat's original parable of the broken window went like this:
The fallacy of the onlookers' argument is that they considered only the benefits of purchasing a new window, but they ignored the cost to the shopkeeper. As the shopkeeper was forced to spend his money on a new window, he could not spend it on something else. For example, the shopkeeper might have preferred to spend the money on bread and shoes for himself, but now cannot so enrich the baker and cobbler because he must fix his window.
Thus, the child did not bring any net benefit to the town. Instead, he made the town poorer by at least the value of one window, if not more. His actions benefited the glazier, but at the expense not only of the shopkeeper, but the baker and cobbler as well.
Woopty Doo Basil, what does it all mean?!
VCs do not operate on loans. They do not hoard their own cash because they make more money on the interest than they do in their own investments.
The money a VC invests is contributed by their investors. Some are seriously rich people, some are institutions (think .edu endowment funds with $100s of millions or $billions). None of it is a loan. If the VC loses all the money, the investors are out the money, period, though they often have a claim on the VC's carry fee (typically 20% of the investment) in that case.
Commercial paper is also not an interbank loan. It's a short term unsecured loan to finance operating expenses. Non-banks absolutely participate in this market.