Crafting a Cleaner Bailout

Posted December 9, 2008 at 6:06pm

As Congressional Democrats strove to finalize a deal with the White House to aid struggling U.S. automakers, not everyone was cheering them on.

Tesla Motors Inc. specializes in making a hip all-electric roadster that rockets from 0 to 60 miles an hour in less than four seconds.

But when it comes to the auto bailout, the San Carlos, Calif.-based company is urging Congress to slow down. That’s because the company doesn’t like the fact that lawmakers are redirecting $15 billion from the Energy Independence and Security Act fund to pay for the bailout.

While Tesla officials haven’t taken a public stance on the bailout bill, they don’t like paying for the immediate cash flow

needs of Chrysler, General Motors Corp., and Ford Motor Co. with money that comes in part from funds set aside to pay for new car technology.

“Based on what [the automakers] are telling the world about their condition, excuse me for not having a great degree of confidence that this money would be returned,” said Diarmuid O’Connell, vice president of business development at Tesla. “It’s of great concern, particularly in how this money would be replenished.”

O’Connell, who is on Capitol Hill this week meeting with lawmakers, said section 136 of the act, known as the Advanced Technology Vehicles Manufacturing Loan Program, is crucial for his industry’s development.

Tesla is hoping to receive about $400 million for two projects. The first would direct a little less than $200 million to ramp up production of its next generation of powertrain batteries.

The remaining $200 million would be used to help finance an assembly line in San Jose, Calif., to build a second-generation roadster sedan that would retail for about $50,000.

Although Speaker Nancy Pelosi (D-Calif.) has insisted that any monies transferred from the Energy Independence and Security Act fund for a Big Three bridge loan will have to be repaid in full, Tesla is continuing its lobby campaign.

This month it brought on two lobby shops: McBee Strategic Consulting and K&L Gates.

McBee has not yet filed its lobby registration.

At K&L Gates, three lobbyists are working on the account, according to Senate lobby records: Scott Aliferis, former legislative director for Rep. Fred Upton (R-Mich.); Denise Gitsham, a one-time Justice Department aide; and Laurie Purpuro, who had been a senior policy adviser at the Department of Energy and chief of staff to then-Sen. Spencer Abraham (R-Mich.).

Tesla Chief Executive Officer Elon Musk is optimistic — but cautious.

“I think that while it is a perversion of the intent of the legislation and the intent of Congress’ funds, if I were in the position of Congress, I would be doing what Congress is doing,” he said. “By the same [token], we need to be vigilant that the funds are replenished.”

To date, Tesla’s efforts have been mainly as an individual company.

The Electric Drive Transportation Association, which represents electric cars, has stayed out of the fight. With a diverse membership including Ford and GM, as well as next-generation companies, the trade group said it is looking beyond this particular section of the bailout.

“We think the auto industry clearly needs assistance, and it’s important not just for our industry down the road but for the economy as a whole,” EDTA president Brian Wynne said, adding that the group had started to look to the upcoming stimulus package to get funding restored.

“The electric drive industry is one of the pathways to green jobs,” Wynne said. “It’s really just a question of sequencing here. We’re making certain that the funds are made whole.”

Ford’s top Democratic lobbyist, Bruce Andrews, said that is his company’s intention as well: “We strongly support the 136 program and feel like there is a joint consensus both to keep the program moving forward in this interim period, but then also replenishing the money.”

Environmental groups such as the Natural Resource Defense Council haven’t immediately jumped to concerns about transferring the funds either.

“We do care about companies such as Tesla that can move forward,” said Roland Hwang of NRDC. “We don’t necessarily see this as being a threat. We just don’t know.”

The Sierra Club, however, has voiced its opposition to “raiding” the program to pay for the automaker bailout, especially because it appears that only about $500 million will be available for the next- generation loans.

“Smaller manufacturers, not these big guys, were intended to be part of getting that money,” said Ann Mesnikoff, senior Washington representative at the Sierra Club. “I think this will block them out.”

And that’s keeping Tesla’s chief executive hopeful, at least for now.

“If I take Congress at their word and the new administration at their word ,which I am inclined to do,” Musk said, “then the right thing will happen.”