Is Ford Motor Company’s $5.9 Billion Bet Beating Tesla at Its Own Game?

Ford borrowed more than ten times as much money as Tesla from the Department of Energy to build cleaner vehicles. Will that big bet pay off?

Apr 6, 2014 at 1:42PM

C Maxsolarenergi

Photo credit: Ford Motor Company 

While President George Bush was an oil man, he still wanted American automakers to build cleaner cars. That's why his administration created the Advanced Technology Vehicle Manufacturing loan program, or ATVM. In the fall of 2008 his administration put $25 billion into the hands of the Department of Energy to hand out to automakers to steer the industry toward making cleaner cars.

Bumps in the road
As it turned out just four automakers received loans totaling $8.3 billion. Of the four just two large automakers received loans with Nissan receiving $1.4 billion while Ford (NYSE:F) received a cool $5.9 billion. Both are not only repaying on schedule but are really making great strides to build more efficient vehicles. Where the loan project didn't work out quite as planned was with the other two loans. Electric vehicle maker Tesla (NASDAQ:TSLA) initially borrowed $465 million, but quickly repaid the loan. Meanwhile, Fisker received $528.7 million and then went bankrupt.

It's easy to see that history and call the loan program a failure. However, that isn't necessarily the case. Tesla was able to use the funds it borrowed to provide it with the liquidity to see its award-winning Model S launch and become a commercial success. The only reason the company paid off its loan nine years early was because a soaring stock price (thanks to the success of the Model S) enabled it to raise a billion dollars and pay back the loan. While there is a case to be made that it should have held on to the government's money, it's hard to fault Tesla for paying the loan back early. Meanwhile, Ford and Nissan have both used the funds to develop cleaner vehicles.

Model S Rollout

Photo credit: Tesla Motors Flickr page

Ford's transformation
Ford in particular has really transformed its business over the past few years to build a more fuel efficient fleet. It's using lighter weight materials like aluminum to cut the weight and improve the fuel efficiency of the next generation of its popular Ford F-150. Ford is also using renewable materials like wood fibers to replace fiberglass and cut weight in an effort to improve the fuel efficiency of the 2014 Lincoln MKX. That's just part of the story, as Ford is also focused on building the next generation of electric vehicles to compete directly with companies like Tesla.

For example, Ford C-Max Solar Energi Concept is a first-of-its-kind sun-powered vehicle. It delivers the best of a plug-in hybrid without relying on the electric grid for fuel. Instead of getting its juice from an electric outlet this car is powered by the sun. It uses a special concentrator that acts like a magnifying glass, which directs the intense rays to the solar panels on its roof. The end result is that a day's worth of sunlight can produce the same performance as its conventional C-Max Energi plug-in hybrid that needs to be plugged into the grid. So, not only will the C-Max Solar Energy Concept get an estimated combined 100 MPGe, but it will reduce the greenhouse gas emissions by four metric tons per car is its energy is completely green.

Ford Solar

Photo credit: Ford Motor Company 

Last year Ford was the second largest seller of hybrid cars in America behind Toyota (NYSE:TM). With new innovations like the C-Max Solar Energi Concept Ford can continue in its drive to become America's top green automaker. It's a feat that might not have been possible if it wasn't for the $5.9 billion it borrowed from the Department of Energy.

Investor takeaway
Ford is quickly becoming a top green automaker. It's making great strides and could potentially be the first automaker to deliver a mass-market car that's a completely energy self-sufficient vehicle. That move could allow it to beat Tesla at its own game and richly reward investors in the process.

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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