Elon Musk, fast becoming the biggest welfare recipient ever. California, what a mess. A Dented Toyota Was Tesla’s Gain How the Japanese car maker came to sell a factory to Elon Musk at a knockdown price. By Holman W. Jenkins, Jr. Oct. 7, 2014 6:41 p.m. ET The Toyota sudden-acceleration furor of 2010 was one of those colossal American dishonesties for which a reckoning never comes. No electronic bug was ever found (as government researchers attested). And among the many untold aspects is the Tesla connection. “If I don’t do it, somebody else will,” might be the personal theme song of Elon Musk , building his industrial empire partly on taxpayer subsidies. In just the past few weeks, he received commitments totaling $2 billion from Nevada and New York for his battery and solar-panel businesses. And legendary are the handouts, state and federal, to his electric-car business, only the latest (that we know of) being California State Treasurer Bill Lockyer ’s grant of $34.7 million in fresh tax breaks in December. A little history: Back in 2007, Mr. Musk struck a deal with New Mexico to build his first Tesla factory, then reneged when California, largely in the person of Mr. Lockyer, offered a better deal. But where in California to build the plant? This is where the story gets ugly—and cautionary, as even Mr. Musk might appreciate. On Aug. 27, 2009, Toyota rejected increasingly strident overtures from state politicians to keep open a perennially profitless joint Toyota- GM plant in Fremont, known as Nummi, for New United Motor Manufacturing, Inc., which happened to be in Mr. Lockyer’s former state senate district and which GM was abandoning as part of its Obama -engineered bankruptcy. California politicians convinced themselves it was Toyota’s obligation to keep subsidizing Nummi and its UAW workers. Toyota waved off millions in dangled “incentives.” It resisted legislators who listed every real and imagined benefit Toyota had received from taxpayers over the years, including carpool lane privileges for Prius drivers and the cash-for-clunkers federal handout. It resisted the unfailing voice of liberal outrage, Bob Herbert of the New York Times, who scolded that “Toyota is paying the state back with the foulest form of ingratitude.” Then, one day after Toyota’s announcement, came the fiery crash of a San Diego dealer’s loaner Lexus, which killed four people and became a cable television cause célèbre. A floor mat improperly fitted by the dealer (who had been warned by a previous driver) was soon fingered. That didn’t stop Democratic Rep. Henry Waxman —whose district contains Toyota’s U.S. headquarters—from holding a televised House hearing to flog the sensational claim that an unseen electronic bug might cause millions of Toyotas to run out of control. Mr. Lockyer the very next day convened his own ad hoc “blue ribbon” commission to berate Toyota about Nummi. Mr. Lockyer’s panel would shortly dispatch a delegation, including actor Danny Glover, to Japan to demand that Toyota keep open the plant to “produce a leading green vehicle associating the model with the progressive environmental image of the state.” In case the company didn’t get the message, California Rep. Jerry McNerney spelled it out to Toyota U.S. chief Jim Lentz at the Waxman hearing: “Mr. Lentz, Toyota is currently experiencing major public relations problems and the public concern about safety failures is going to hurt your bottom line. California is one of your biggest markets, and it’s obvious that keeping Nummi open will help rebuild your image. Wouldn’t that be beneficial to Toyota?” The Tesla-related sums would prove a rounding error in the total cost of the unintended acceleration fracas to Toyota, which has run to many billions, but Toyota got the message. Several weeks later it announced a deal to transfer the giant Nummi complex to Tesla at a knockdown price. It also agreed to invest $50 million in Tesla’s forthcoming IPO and spend $160 million to buy Tesla components for a hastily designed Toyota electric SUV that would be sold exclusively in California for about half what it cost to build. This deal may well have assured the success of Tesla’s IPO a few weeks later. To its credit, the Los Angeles Times would level with its readers about Nummi, citing an industry consultant to the effect that “California just isn’t competitive in manufacturing with its taxes, regulations and overall cost of doing business.” Perhaps the moral is obvious but dishing out handouts to favored businesses like Tesla at the expense of the state’s other taxpaying workers and employers is hardly a solution to California’s problems. And such Mommie Dearest love brings its own Faustian risk: The favored business can find itself, as Toyota did, under pressure permanently to subsidize a money-losing plant as a “success” politicians can point to even as their policies ensure that real success eludes other businesses in the state. By the way, the most lavish of Toyota bashers was state Sen. Ted Lieu, who likened the company to Lincoln assassin John Wilkes Booth. Mr. Lieu is likely to become Tesla’s new congressman when Mr. Waxman retires after next month’s election.
Posted on: Wed, 08 Oct 2014 13:40:49 +0000
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