Fisker Took Us for a Ride – Will Tesla?

Last April, Fisker Automotive missed the very first payment on the $192 million it had borrowed from the U.S. government to build luxury hybrid sports sedans that are priced over $100,000 – in Finland.

That default on the $10 million payment was probably inevitable since the company had not built a single vehicle in the nine months previous to the defaulted payment.

But we taxpayers should consider ourselves fortunate. The hit on the treasury could have been much worse if Fisker had borrowed the full amount of the original loan commitment of $529 million. As it stands now, the government has recovered $21 million, putting the amount that Fisker still owes at $171 million.

Fisker borrowed that money under the Energy Department's Advanced Technology Vehicles Manufacturing Loan Program, the same program that has also been dishing out guaranteed loan dollars to Tesla Motors (NASDAQ: TSLA  ) so it could produce plug-in electric luxury sports sedans that are over $100,000.

Tesla has borrowed $465 million but, in contrast to Fisker, has already begun paying back the loan and promises to pay it back in its entirely in only five years rather than the original 10-year term.

That's a pretty good achievement – and a gutsy promise – for a company that has not produced a profit since it went public in 2010. However, it should be noted that Tesla amended its guidance at the end of March saying that the company would reach full profitability for the first quarter of 2013. We'll have to wait until the Tesla quarterly earnings statement comes out after the market closes on May 8 to see if that prediction holds true.

Let's hope the accountants putting together Tesla's earnings won't be using the same fuzzy thinking the company employed in the disregard for reality displayed in its "True Cost to Own" calculator found on its website.

To be fair, Tesla realized it was in error using a $100 an hour rate for figuring out how much one would save in not spending time at the gas pump. Even CEO Elon Musk himself admitted "we didn't get it quite right."

"We've changed the defaults to be more conservative," Musk said during an announcement in reaction to the disbelief engendered by the company's original fiscal fiction. "We included too many non-financial elements."

The Department of Energy's loan program was meant to give a boost to developers of alternative energy vehicles in order to lessen our dependence on fossil fuels. Whether or not guaranteeing $500 million loans to luxury vehicle producers will achieve that goal is certainly open to debate. But we have to make sure we don't produce cars that will only run on snake oil.

Near-faultless execution has led Tesla Motors to the brink of success, but the road ahead remains a hard one. Despite progress, a looming question remains: Will Tesla be able to fend off its big-name competitors? The Motley Fool answers this question and more in our most in-depth Tesla research available for smart investors like you. Thousands have already claimed their own premium ticker coverage, and you can gain instant access to your own by clicking here now.


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  • Report this Comment On May 07, 2013, at 2:21 PM, RickT232 wrote:

    Quite the cheap shot, this article. Fisker was not in the same league with Tesla. They failed. Tesla seems to be doing (almost) everything right. They were already selling cars when they began drawing the Federal loan. They are now making 500+ cars per week. The Model S, nicely tricked out, does NOT cost over $100K (although there are model/option combos that do). They have no intention of remaining solely a luxury car provider. Their stated mission is to bring electric cars to the masses. This is hard because high volume, low cost car manufacturing is hard. They have great staff who know how to do it and they are consciously teaching themselves as a company to do it. So they are starting at the high end where margins are high and volumes are low. Their stated plan is to reduce the cost of each newly released model and they show ample evidence of doing just that. Yes, they exaggerated their financing plan and for that they adjusted. But keep a close eye on this manufacturer. I firmly believe they will do as they have promised, report initial profitability tomorrow, pay off their loans ahead of schedule and move on to become either a successful full-line electric car manufacturer or get bought out by one of their mainstream automotive partners (Toyota or Mercedes, for example). Tesla is doing great stuff.

  • Report this Comment On May 07, 2013, at 2:29 PM, Stymie67 wrote:

    Yes, a cheap shot indeed. Ignorant, formless and insubstantial contribution.

  • Report this Comment On May 07, 2013, at 3:04 PM, Bioengr wrote:

    Dan, Clearly you have not driven a Tesla. If you did, you would know that it's much better than Fisker was. The Model S is the coolest car on the planet. What has it got? Looks... Incredible performance (0 to 60 in about 5 sec)...great handling (due to extremely low center of gravity),... a beautiful and well designed computer interface.. an amazing amount of cargo space. No kidding, it's over 55 cubic feet! When you think about how Tesla has replaced a huge, inefficient, polluting, noisy engine with a motor smaller than a beer keg and battery pack on the bottom, isn't it a huge Duh, this is way better?! Is it expensive? Sure, but it's competitive with other luxury sedans like BMW, Audi and Mercedes. Some people are concerned about range and charging but it's not really a problem. You charge it overnight in your garage. It has a range of about 250 miles and there are charging stations being built all over the place. Two weeks after buying one, I bought some TSLA. It is the future of the automobile.

  • Report this Comment On May 07, 2013, at 4:47 PM, XMFDRadovsky wrote:

    Dear Readers,

    What kind of a cheap shot did I take? Isn't it true that both Fisker and Tesla took out guaranteed loans from the U.S. government? And since I pointed out the difference between Fisker's defaulting on its loan and Tesla's doing the opposite, shouldn't I be thanked for separating Tesla from its deadbeat brethren?

    It seems that if I or any other writer doesn't say Tesla the car, or Tesla the company, or Elon Musk the CEO are anything but the best thing on the planet then we are either shorting the stock or just plain twisted.

    Not to kick a dead battery, but this reminds me of Tesla the company's (over)reaction to the recent New York Times road test. http://wheels.blogs.nytimes.com/2013/02/14/that-tesla-data-w...

    Some of the same problems that the NYT reporter had with his review vehicle were experienced by this Tesla owner, an admittedly smitten Tesla owner:

    http://www.businessinsider.com/what-its-like-to-own-a-tesla-...

    The NYT affair was not the first contretemps that Tesla has had over a not-totally-flattering review of one of its vehicles. Top Gear, the BBC car show, reviewed the Tesla Roadster a couple of years back. That particular review specimen had some problems that were pointed out to viewers in the highly opinionated manner that program is noted for.

    Tesla sued Top Gear for defamation and malicious falsehood in a U.K. court and lost.

    http://transmission.blogs.topgear.com/2011/04/02/tesla-vs-to...

    It is true that I haven't driven a Tesla. The only electric vehicle I've ever driven is a golf cart. I am sure it is quite an experience. I do believe the Tesla is quite a beautiful car in a conventional way, and it looks even better in person than it does in the photos. Someone in my neighborhood drives one, and I see it sometimes when he or she drives it to and from work.

    I have also seen a Fisker. Actually, I and my dog felt its presence while on a neighborhood walk. We heard a strangely alien electronic pulsing getting closer and closer and suddenly what turned out to be a Fisker slid by us like the space ship in the opening scene of Star Wars. The Tesla may be gorgeous, but the Fisker was, frankly, in a class all by itself in terms of jaw-dropping effect.

    Photos don't do the Fisker justice either.

    For those who are more interested in skin-deep beauty rather than state of the art technological beauty, they would be heartened to know that there are plans to convert Fisker Karmas into -- eco-wonks, avert your eyes -- V8-powered honkers.

    http://www.foxnews.com/leisure/2013/05/06/will-fisker-karma-...

    Thank you for reading,

    Dan

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