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Elon Musk Bailed Out of $6bn Google Takeover To Save Tesla From 2013 Bankruptcy
An anonymous reader sends word that Elon Musk almost sold Tesla to Google in 2013 when the company was close to bankruptcy. "Elon Musk had a deal to sell his electric car company Tesla, to Google for $6bn (£4bn) when it was heading for bankruptcy with just two weeks' worth of cash left in the bank. During the first week of March 2013, Musk spoke to his friend Larry Page, chief executive of Google, about the search giant buying his car company, which at the time was suffering from falling sales amid technical problems with the few Model S luxury sedan cars it had delivered. Ashlee Vance, author of upcoming book Elon Musk: Tesla, SpaceX and the Quest for a Fantastic Future, claims in an extra for Bloomberg two people 'with direct knowledge of the deal' said Musk and Page agreed to the buyout and shook on a price of around $6bn. This was plus promises from Google to invest $5bn for factory expansion and to not break Tesla up or close it down."
More competition is better. We know google is working on their own car - but the Tesla is here today and doing better than anyone ever thought. No wonder the guy can do rocket science.
"Transparent" is a shit show that trades on every stereotype going. A man in drag is NOT a transsexual.
You must seriously not understand what a communist is. Hint, it's not a capitalist vulture like Musk.
Here I'll even include a wikipedia link for you.
https://en.wikipedia.org/wiki/...
...because Mr. Gates, a good friend of Mr. Jobs, personally chose to continue releasing versions of Microsoft Office for Apple's products to help Apple remain a viable platform for Microsoft's customers.
Please tell me how an anecdote from a couple of years ago is news...
Do not look into laser with remaining eye.
You nor I could ever hope to match this guys gravitas. He has been so successful he can now get things done through the virtue of his past accomplishments. Who amongst us could go anywhere and get any amount of money even remotely to what he was promised.
Not saying anything bad about it, just making a general statement of awe.
--headline with a question mark--
Maybe it's my reading comprehension, but this headline made it sound like this deal actually happened to me.
According to the article, "But the deal never happened because Tesla's fortunes quickly began to turn after Musk demanded that all staff, no matter what their job title, get on the phones and sell cars to curious customers who had placed refundable deposits."
Perhaps the headline should read "almost bailed out," or something similar.
https://www.eff.org/https-everywhere
...gave him enough money to save him from bankruptcy.
I.e. Tesla only exists thanks to corporate welfare, in which billionaires get generous loans from struggling average Joes.
Ugh.
That's possibly the dumbest thing I've read this week... but it's on Slate, so... yeah.
Of course he paid the load back early. That's what anyone with an IQ above room temperature and even an ounce of financial sense would do. That quality is how he went from near bankruptcy to billions in the bank, by the way. It's also far and above what happened with Solyndra, which did not repay its loan in any way, filing for bankruptcy and repaying debtors pennies on the dollar. In case that's not clear enough for you: your statement is a bald-faced lie.
Seriously, the google boys are some of the most important business guys going. However, unlike most of the business ppl, such as Romney, Fiorina, McNerney, Welsh, Koch bros, etc, they focus on nothing but making money and have no interest in the future of America or Mankind.
I prefer the "u" in honour as it seems to be missing these days.
And, while we are at it, our (taxpayer's) investment in Tesla was even worse than in Solyndra.
Interesting article. It does make a good point about the government not getting its due returns on such an investment, yet ignores the complications of government ownership in a business and how that might lead to interference one way or another. I think it might be a good idea for the government to have loan requirements that payback proportionally more if the company's value grows, or stock held in some escrow like account that is not managed by the government, but pays out to them at predetermined times. Somehow, the government ownership part needs to be avoided.
Look at the big board!
That's possibly the dumbest thing I've read this week
I'd go month.
But naw, Musk and Tesla clearly did mi up there out of something, what with the paying back of loans, including interest, and generation of jobs and all.
Fucking Department of Energy, it should be replaced with a Silicon Valley vulture capitalist group, post haste, amirite?
This is FUD. You may argue that Department of Energy should have acted as venture capitalist and demanded more return, but it is not a loss. It is potential profit that was not received. Congress explicitly required Department lend on low rates and they have good reasons for it. Department is not a venture capitalist and should not act as such, such activity should be left to private business, not Government entity. There is big difference between corporations requiring bailout because of their own mismanagement or fraud while doing usual business and corporations trying to introduce something completely new, that may benefit all taxpayers in the long run. Hence the loan was from Department of ENERGY, not Treasury.
Yeah, the DoE got its loan repaid *in full*, *early*, and *with interest*, and the result was a successful American company providing employment and driving innovation with world-leading products, built in America, and paying US taxes. But according to the dimwit that wrote that article, because the DoE was in a position to bend Tesla over and fuck it in the ass, and they did not do that, that represents a "DISASTER" for taxpayers. Sometimes you just have to shake your head and move on.
It's also far and above what happened with Solyndra, which did not repay its loan in any way, filing for bankruptcy and repaying debtors pennies on the dollar. In case that's not clear enough for you: your statement is a bald-faced lie.
And let's not forget the bald-faced lies that were often told about Solyndra. For example, there's a lot of people who didn't realize they had a working product, a factory, and were generally capable of delivering what they promised. What they couldn't handle was...somebody else delivering more than they could. Which might have been as much because of Chinese government subsidies as anything else.
Heck, I'm sure a lot of people thought the entire 40 billion dollar DoE program failed, all of it, in the entirety. Not one single company did a thing. They were just taking money and...I don't know, a bunch of con artists with no intention of delivering anything.
But there is no such thing as a free market. Yet most people still agree that competition helps drive [pun] the economy.
As such, there is no reason to believe that they will not consider building their own cars. And if they were to do so, I am guessing that they will Work with Tesla to make their own.
There is a very good reason to believe they will not consider building their own cars. The reason is economics. Cars are a generally low margin business with huge capital requirements. The engineering and manufacturing are something Google has absolutely no expertise or advantage in. A VERY profitable large car manufacturer has profit margins around 8-10% (see Porsche or Toyota) and most are somewhere between 0-5% most of the time. Google right now has profit margins around 25%. If they got into the car business in any sort of meaningful way their profit margins would drop like a rock along with their share price. They would be jumping into a cutthroat business that they have zero advantage or experience in. Even if they bought a company like GM outright, it would be basically nothing but a huge distraction from their primary business. A company like Tesla they could manage because it is so small but eventually they would probably sell it off.
While Google has the financial means to get into the car business if they wanted to, they would be insane to do so. I could easily see them providing technology used in cars but I don't see any (sane) reason why they would actually want to make cars themselves.
Elon Musk isn't a visionary thinker like William Shatner.
I.e. Tesla only exists thanks to corporate welfare, in which billionaires get generous loans from struggling average Joes.
Substitute Tesla for GM or Chrysler and you could say the exact same thing.
The difference however is that GM and Chrysler provide a huge number of jobs both at themselves and their suppliers for those "struggling average Joes". Without them the Joes would have been much worse off. You really do not want to know how big a blow to the economy it would have been if they had not received bailout loans. Tesla on the other hand is a promising small company that needed a cash bridge to get their next product to market. They paid the loan off early and are looking like they might be a huge success so it's unclear to me what the problem is in the case of Tesla.
This is FUD. You may argue that Department of Energy should have acted as venture capitalist and demanded more return, but it is not a loss. It is potential profit that was not received. Congress explicitly required Department lend on low rates and they have good reasons for it. Department is not a venture capitalist and should not act as such, such activity should be left to private business, not Government entity. There is big difference between corporations requiring bailout because of their own mismanagement or fraud while doing usual business and corporations trying to introduce something completely new, that may benefit all taxpayers in the long run. Hence the loan was from Department of ENERGY, not Treasury.
And yet, the federal government makes loans to grad students in the 6% to 7% range. A failing tech company with a billionaire owner gets low interest loans because of the potential for the future, but low and middle income grad students, who really are the future get high rate loans.
But there is no such thing as a free market. Yet most people still agree that competition helps drive [pun] the economy.
It isn't really about a free market, but about capitalism as an economic system. According to capitalism, Tesla, should have gone to the banks or investors and if Musk's plan was good, he would have received the capital he needed to stave off bankruptcy. He actually did that and had a deal worked out. However, the government also intervened in the market and offered him a better deal. That is not capitalism, but corporatism (which is the politically correct modern name for fascism).
Either way, Musk and Tesla would have staved off bankruptcy, the difference is that with the government bailout/loan, Musk gets to keep control of Tesla, whereas the Google investment would have split control. It's not so much about a free market, but instead about the government intervening in the economy that seems to benefit only a select few. I'm not saying that the government should not have loaned the money to Musk. I am saying it should only have done so if there were no other option. Since there was another option, although less palatable to Musk, he should not have received a federal bailout.
Put differently, unlike the GM bailout, this bailout was to somebody in the 1% group to enable him to make luxury automobiles for others in the 1%. All paid for by the 99% who can't afford such a vehicle in the first place. It may be argued that GM was too big to allow to fail, but it is hard to argue that about Tesla, particularly when there was private financing available.
No, "corporatism" was Mussolini's preferred phrase, over that of "fascism." It is not "fascism" by any stretch of the imagination for a company to get a loan from the government.
And subjected himself to the whims of the corporations that gave him money? I'm sure they totally wouldn't interfere with the way the company operated, they'd never start demanding ridiculous growth at the cost of product quality and customer service, not at all.
At worst there is no difference. At best, it prevented an actually innovative company from sinking and its technology dispersing into the market, never to be heard from again while GM et. al. continued doing what they were doing.
So because one wrong policy is wrong, we should make all other policies that are remotely related wrong too? Is that what you are arguing here?
How about we just fix the wrong one (higher-than-mortgage-rates interest-bearing student loans)?
Slashdot still doesnâ(TM)t support Unicode after it was added to the HTML standard in 1997.
"but low and middle income grad students, who really are the future"
How so? Does the government get some guarantee on these grad students that's any better than what the DOE has? I don't think so.
At least someone got it...
[continues to chew gum]
corporatism (which is the politically correct modern name for fascism)
The idea that fascism is synonymous with corporatism is wrong. Its a false meme often repeated by some on the left for political purposes, a technique of manipulating the ignorant. Much like some on the right toss around the word "communistic".
In reality fascism is a form of syndicalism, where workers are formed into syndicates to counter the power of owners. Fascism is actually quite socialistic in this respect. Fascism does not fit neatly into the political spectrum, it is a weird combination of ideas from the left and right.
More importantly under fascism both the corporation (owners) and the workers are subservient to the state. The state created a somewhat level playing field for the two to negotiate on but they damn well better put aside any labor squabble if its going to interfere with state requirements.
Yes, head of and used some of them. Quite inferior solutions. Not at all up to Tesla standards. "Successful" only because they are free.
Tesla recently sold a record number of cars, exceeding expectations.
It doesn't matter if demand in China is lower than expected when demand in the US and Europe is unfulfilled. Units that might have been originally planned for China get redesignated for US or Europe during production.
You are incorrect.
The loan from DOE was made in 2010: http://energy.gov/lpo/tesla-motors
He looked for help from Google in 2013.
No, "corporatism" was Mussolini's preferred phrase, over that of "fascism." It is not "fascism" by any stretch of the imagination for a company to get a loan from the government.
And subjected himself to the whims of the corporations that gave him money? I'm sure they totally wouldn't interfere with the way the company operated, they'd never start demanding ridiculous growth at the cost of product quality and customer service, not at all.
At worst there is no difference. At best, it prevented an actually innovative company from sinking and its technology dispersing into the market, never to be heard from again while GM et. al. continued doing what they were doing.
Yes, Mussolini preferred the term corporatism, over fascism, but corporatism, today, is the acceptable term because of fascism has ties to Hitler and Mussolini.
It doesn't matter if if Google or anybody else would have changed Tesla, that is not the point. As an investor in the company, they have every right to do so, up to the point of their percentage ownership. That's how corporations work, after all. The government had no need to bail out Tesla as there was private financing available, unless you want to argue, they wanted to further Musk's vision for Tesla. However, that brings us back to corporatism/fascism.
Finally, even if Tesla had a bunch of good, even innovative ideas, that doesn't make them an innovative company if they can't bring product to market. There are a lot of entrepreneurs that have good and innovative ideas, but unless you can deliver, they are simply dreams. Musk delivered, because the government made him a below market loan, that came from the taxpayers.
It sounds like you are arguing that government should fund billionaires companies because it might produce innovation. Historically, billionaires became billionaires because they took on the risk of promoting their vision, not the taxpayer, but maybe this is the New America, where government is needed to even run our companies.
So because one wrong policy is wrong, we should make all other policies that are remotely related wrong too? Is that what you are arguing here?
How about we just fix the wrong one (higher-than-mortgage-rates interest-bearing student loans)?
I, for one, would support that 100%. But, until they do, why should billionaires get a better government interest rate than the average person?
"but low and middle income grad students, who really are the future"
How so? Does the government get some guarantee on these grad students that's any better than what the DOE has? I don't think so.
Actually, yes. These loans can't even be dismissed via bankruptcy and many government benefits are tied to the repayment of them.
and that will stick with him forever.
False. Though I do Fear the government, there was nothing Uncertain or Doutbful about my post.
That's, what the statists, who wrote the Slate's article, are arguing: government-investment is Ok, it just should've been done better. I argue, that the government should not be "investing" in anything at all.
No, actually, their reasons were bad — and that's the point. Whether the investment is repaid (Tesla) or not (Solyndra), it should not have happened in the first place — because, if the person making the decision is not risking his own money, then it is not a proper "investment".
Marvelous! You got it!!
There is no difference. Mortgage-backed securities are just as innovative as pure-electric vehicles. Risky, but potentially rewarding. The government should not be swinging its enormous purse in either market.
Distinction without difference. Not to the point I was making, anyway. And BTW, I said nothing about the bailed-out financial companies, you did.
In Soviet Washington the swamp drains you.
Remember, Slate's entire business model is to find fault where there is none and assign blame. Keep this in mind when you read their next inflammatory article and you'll see the pattern.
My God, it's Full of Source!
OUTSIDE_IP=$(dig +short my.ip @outsideip.net)
To be fair, these are unsecured loans. Yes, the rate is higher than the ~4% you would get for a mortgage, but it's better than the 18% you would pay on a credit card and on par with the rate you pay on a car loan. The crazy part is that you are barred from refinancing your student debt.
"Free market" may be a Platonic ideal, but market freedom can still be compared. A market, in which the government invests billions of captive taxpayers' monies, is less free, than one, where only private investors exist.
Not all competition is useful. The skillset required for convincing government bureaucrats to extend loans has little overlap with what's needed to secure real investment from people risking their own funds.
In Soviet Washington the swamp drains you.
At worst there is no difference. At best, it prevented an actually innovative company from sinking and its technology dispersing into the market, never to be heard from again while GM et. al. continued doing what they were doing.
Employing 216,000 people directly, and hundreds of thousands more indirectly via the supply chain?
Whatever Mussolini's preference, Fascism originated in Italy. That government officials are in a position to extend loans at all, is Collectivism — a sticky coin of which Fascism is one of the sides (Communism being the other).
This very FA talks about it not sinking, but selling to another company...
In Soviet Washington the swamp drains you.
Then what "-ism" would you suggest to describe what the current situation is in the US?
Maybe reality is more complex that any -ism? More complex than the politicians and their adherents would have us believe?
Student loans are the most secure loans made.
You cannot default on a student loan. You can be in bankruptcy, broke, homeless, unemployed, with kidney failure, and you still cannot default on your student loan. There are only two ways out: pay it off, or die. And seeing as how most folks incur student loans when they are 18-26, odds are strongly in favor of the lender.
You can refinance student loans, people didn't in the past because your student loan was at ~3%. When the House GOP refused to pass a continuation of the low rate program, they jumped to 6-7%. So at this point, if you have equity in your house, life insurance, or retirement fund, it may well be worth it to refi with a secured loan and get back to 3-5% APR.
Also, my credit union was just advertising new vehicle loans for 2.85% APR. And as far as secured loans go, vehicles suck on the secondary market, there's just too much depreciation as soon as you drive it off the lot. But if you're paying 7%, or the 18% number you mention, it's because your credit rating is likely crap. Heck, even my credit card is at 9%, and I'm sure there are better rates out there.
-Rick
"Most people in the U.S. wouldn't know they live in a tyrannical state if it walked up and grabbed their junk." - MyFirs
The program that included the solyndra investment was profitable as a whole.
Everyone talks about the money lost but forget that solyndra failed because the Chinese were more than capable
Because no lender in their right mind would loan students money to begin with.
Student loans are unsecured - the student doesn't put up anything and can borrow easily $100K. And if the student can't find a job, it's not repaid. No lender would take that kind of risk, especially at a measly 7% interest rate - typical unsecured loans are closer to 20-30% (you know them as credit cards).
So the government has to put in some incentives otherwise financial institutions will not provide the loans as they're too risky. By making it non-dischargeable, the banks know that declaring bankruptcy will not make it go away for pennies on the dollar with no recourse (assuming they can get anything - secured creditors are paid first and often the money isn't sufficient to cover those so those take pennies on the dollar. Unsecured creditors typically get zilch).
It's just like if your company goes bankrupt - as an employee, your unpaid wages and benefits are unsecured, so you line up with the rest of the unsecured creditors to hope to get some money.
Back to Tesla, those DOE loans went to a lot of people. Few companies every paid even a portion back. Tesla managed to pay it back, early, with interest.
I wasn't referring to loan repayment. In response to your "potential for future" statement, I was referring to the ROI in terms of progress and advancement. There's no guarantee the grad student will do anything significant in return for the loan. Tesla on the other hand, already has.
Getting taxpayers a profit proportional to the lending risk they assumed is not "fucking [Tesla] in the ass".
The loan program also lends money to epic failures like Solyndra - if they don't maximize their profits on the better investments, they won't cover the costs on the bad ones.
Federal tax money is not a personal piggy bank for your favorite CEO/corporation. "Socialized risk and privatized profit" ring a bell?
Any loan program will have failures. I remember during the 2012 election Rupublicans said Obama was terrible, because fed loans made under him had a 20% bankruptcy rate. But hailed Romney as a business hero even though under his leadership Bain Capital had a 50% bankruptcy rate. The numbers aren't as bad as people make out for either; that's how these things work. We can't act like the sky is falling over some failures.
And the feds don't need to make back all their money via repayment. As the other poster said, Tesla is still paying US taxes and hiring US workers. The feds get money off that too. The feds didn't need to recoup all losses simply by repayment since they gain (maybe more so) by having a successful company.
Among all the companies in that program the default rate was very low. Solyndra was the only noteworthy default. The DOE made a solid overall profit on the program. It was indisputably a successful program.
The program was publicized as being high risk speculative investments but in fact DOE was pretty conservative with their lending decisions.* DOE knew they were making low risk and moderate risk investments so there was no need for them to demand junk bond level interest rates.
*They were conservative because as a government agency they are under immense scrutiny and they knew if a lot of their debtors defaulted conservatives and the media would jump all over them, even if the program was successful overall. Of course conservatives jumped all over them anyway.
You don't get much more secured than "completely unable to declare bankruptcy short of being rendered a quadriplegic in a car accident". Students are on hook for these loans, for life. No other individual or business is held to such standards when taking a loan.
I wasn't referring to loan repayment. In response to your "potential for future" statement, I was referring to the ROI in terms of progress and advancement. There's no guarantee the grad student will do anything significant in return for the loan. Tesla on the other hand, already has.
At the time of the loans, there was no guarantee that Tesla was going to do anything significant in return for the loan, either. Besides, do we really want the government to be in the role of venture capitalist with taxpayer money?
Any loan program will have failures. I remember during the 2012 election Rupublicans said Obama was terrible, because fed loans made under him had a 20% bankruptcy rate. But hailed Romney as a business hero even though under his leadership Bain Capital had a 50% bankruptcy rate. The numbers aren't as bad as people make out for either; that's how these things work. We can't act like the sky is falling over some failures.
Taxpayer money, collected involuntarily ... versus private capital, collected voluntarily from people who wanted to risk their money chasing profits.
Are you unable to notice a simple, fundamental difference in the source of money?
I'll also note that your metric of success for the loan program is simply wrong. It's not measured by bankruptcy rate ... but net profit. Profit means that overall, the money was productive; bankruptcy in of itself is not relevant.
And the feds don't need to make back all their money via repayment. As the other poster said, Tesla is still paying US taxes and hiring US workers. The feds get money off that too. The feds didn't need to recoup all losses simply by repayment since they gain (maybe more so) by having a successful company.
It has not been shown that federal interference produced a better outcome than if Google had simply bought Tesla out.
If you want to justify federal loans, that's what you need to prove.
Among all the companies in that program the default rate was very low. Solyndra was the only noteworthy default. The DOE made a solid overall profit on the program. It was indisputably a successful program.
No, it isn't "indisputably a successful program". http://www.forbes.com/sites/ti...
Every cent of money funding this loan program was taken from a US citizen who could have been using it for some superior performing personal investment.
You are aware that Android is currently dominating the mobile market?
You'd have to live under a rock to not know how Android is doing. What is your point? Google makes virtually no money from Android directly.
You're also quite wrong. Google have a huge stake in GIS and have become one of the worlds leading imagery providers, so much to the point that they now have their own satellites (GeoEYE).
Which is entirely consistent with their search driven advertising business. That's not a distraction. That's a core business for them and really it is a cost center. They bought that so that they could enhance their local search.
Google is extremely diversified, so much so they could survive the complete destruction of their advertisement business.
Google is barely diversified at all. You haven't actually looked at any of their financial statements. Google makes close to 95% of their revenue from advertising. Fourth quarter 2014 they made $46 billion in revenue and $43.6 of that came from advertising. Google would be bankrupt if their advertising business disappeared.
If you want to see what an actual diversified company looks like go look at Berkshire Hathaway or General Electric. Hell, even Microsoft is more diversified than Google. Despite all the hype, Google is pretty much a one trick pony. It's a REALLY good trick but they don't have a second one right now. Their main saving grace is that they have so much cash in the bank that they could buy their way into a new line of business if they needed to. But they haven't developed anything in house that meaningfully changes the fact that virtually all their revenue comes from advertising.
You want to ignore ENERGY part and reduce it to some bank loan logic. This is not about making profit or loss lending money. This about making country independent energy-wise too. Every time you buy gas, your money props up global oil market (the fact that US forbids oil export doesn't matter, global oil market is still closely tied and will be), and it supports regimes that are clearly hostile to the US and his allies. US military budget reaches $786.6 billion for 2016. You get zero (nil) financial return on that, and there is no free market nor "government independent" in the army. Department of Energy loans are pennies comparing to that. Yet they have potential to push things to the right direction geopolitically and make world more secure place.
If there has been a "bold-faced lie" in this thread, you are it. Banks were making them and even continue making them today, despite government competition. Here is one example — from a credit-card issuer — and a simple Google-search returns many more.
That this is bovine excrement is already established. Here is why... Unlike those "typical unsecured loans", which are spent on quickly-depreciating merchandize or completely worthless vacations, education usually increases the person's money-earning abilities. They earn and they do pay back — a large enough portion to keep lenders in the green.
Government's student loans is the solution searching for problem at best. At worst it is the first step towards nationalizing higher education the way schools are nationalized already — while affording the government better control over citizens by attaching various strings to the approvals (you can't get a loan without registering for Selective Service, for example).
It is (or can quickly become) an instrument of oppression and needs to be rejected and ridiculed, not celebrated...
In Soviet Washington the swamp drains you.
Yeah, yeah — and reduce Global Warming, right.
Except electric cars still need energy — so, instead of burning something inside the vehicle, we now have to burn something somewhere else — often enough losing overall. And instead of depending on our own oil, we now need the Chinese to make those wonder-batteries — so our dependence on the potential military rival only grows with each Tesla sold.
But a great idea otherwise — as great as any to come up from the so-called "progressives"... Keep at it.
In Soviet Washington the swamp drains you.
You're still advocating making bad policy spread. This vengeful attitude is why the US tax code is fucked.