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

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.

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.

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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Read/Post Comments (22) | Recommend This Article (10)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 06, 2014, at 4:21 PM, speculawyer wrote:

    Ford's $5.9 Billion low-interest government-backed loan was largely a stealth bail-out of Ford.

  • Report this Comment On April 06, 2014, at 5:14 PM, JIMMYLIMO wrote:

    Correct me if I'm wrong, but for nearly ALL of his term, President Bush and the Republicans blocked any and all attempts to raise CAFE mileage standards, claiming it would "cost America jobs". They wanted to keep us addicted to gas guzzling V8's and over-sized SUV's.

  • Report this Comment On April 06, 2014, at 5:22 PM, HammerHead411 wrote:

    "Ford's $5.9 Billion low-interest government-backed loan was largely a stealth bail-out of Ford"

    You couldn't be more wrong with your "bailout" comment! The US gov't has a vested interest in developing energy efficiency & independence. Therefore, massive amounts of gov't R&D loans and tax breaks to private companies and grants to universities are 100% necessary for advanced study.

    If you disagree then I assume you also feel the Fed is bailing out all of Pharma (big and small) cause w/o the grants and tax breaks many drugs/treatments would never be developed (especially for low percentage diseases).

  • Report this Comment On April 06, 2014, at 11:17 PM, RHO1953 wrote:

    Republicans believe consumers can make their own choices. You obviously believe government has a right to tell you how to live, what kind of car you can have, pretty much everything. Look what it has gotten us; the price of a car has doubled in the last seven years. All the government mandates have driven the price up. The only metro area in the entire country with a high enough per capita income to afford a new is DC, the only place that is thriving. Government gets bigger, the rest of us get thinner.

  • Report this Comment On April 07, 2014, at 4:10 AM, Happyman584 wrote:

    With all due respect, this article comes across attempting to compare "apples and oranges" to say the least. Full disclosure, I own both stocks and am a Ford man for my entire life ('65 stang in the garage) but these two cars are night and day. I applaud Ford's efforts but lets be clear, the C Max Solar concept has an expected daily range of 25 miles. Nothing about it took huge R&D expense to come up with. Its technology has been around for years. The real question is who, if anyone, would ever buy it,

  • Report this Comment On April 07, 2014, at 4:18 AM, Happyman584 wrote:

    correction: the C Max estimated range of 25 miles is the electric portion only (it is still primarily a gasoline powered car).

  • Report this Comment On April 07, 2014, at 10:36 AM, matt8375 wrote:

    Sell the C Max Solar at a bit more than a Focus, and I'd buy it to commute.

    My drive is only 30 miles round trip. I like a gallon a week fuel consumption.

    Who will buy them? People with Garages likely ;)

  • Report this Comment On April 07, 2014, at 12:54 PM, AmericanFirst wrote:

    Speculawyer,

    Ford's $5.9B "Loan" was from the same Dept. of Energy Fund designated for "green technology" development, the same fund which Tesla, Nissan, Fisker and others received loans. A loan which WILL be paid back as agreed. Conversely, the gov. just "lost" $10.5B on the taxpayer GM Bailout, plus the $45B corp. income tax benefit funded by the taxpayers. Also,I'm sure that the bondholders that were fleeced for $30B, plus $B's in future interest income per the GM Bailout are not feeling much love for GM.

  • Report this Comment On April 07, 2014, at 4:26 PM, smilingdon wrote:

    I have ridden in a few new Ford cars and they are really quality and appealing. I was amazed at how quiet the electric ones were.

  • Report this Comment On April 07, 2014, at 7:22 PM, FoolsRushIn1234 wrote:

    What a bunch of BS. Tesla got a relatively meager loan, repaid it 7 years early, and you make that out as a bad thing. Tesla makes a great electric car that gets over 200 miles per charge and they succeeded through hard work and determination. Nissan got $1.4 billion and they at least have a respectable EV in the Leaf, which they are making improvements on. Ford, on the other hand got a whopping $5.9 BILLION and all they came up with is a lousy 25 miles on electric power. Seriously, how can you wave the flag for Ford when they are obviously wasting a ton of taxpayer money on what are really compliance cars?

  • Report this Comment On April 07, 2014, at 7:28 PM, speculawyer wrote:

    HammerHead411 & AmericanFirst,

    I'm happy that Ford got the $5.9 billion loan and approve of it. But I maintain that it was largely a stealth bail-out. They didn't need $5.9 Billion to develop the Ford Focus Electric . . . that was largely designed by Magna, a supplier that made the electric drive-train. They did develop the CMAX & Fusion hybrids . . . but they had to develop those anyway. The Prius is the #1 selling car in California and Ford has to be in that important and growing sector. They did also make Energi versions of those cars but they should have bigger batteries. So I'm glad Ford got the loan . . . but the truth is that money was largely used to help bail them out at a terrible time for the industry and it helped prevent them from going bankrupt.

    It was an excellent program and I'm glad they got the money. But I wish people would just be honest about it.

  • Report this Comment On April 07, 2014, at 9:13 PM, TheMogget wrote:

    "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."

    Sure it didn't work 'as planned', but the Tesla loan could not have worked out any better! Paid early, entered a difficult market, made the first electric vehicle that people would take seriously, and proceeded to earn the accolades of the entire industry.

  • Report this Comment On April 07, 2014, at 10:06 PM, Flame3g wrote:

    Who writes this garbage (stop with Tesla bashing already). The loan worked out perfectly for Tesla.

  • Report this Comment On April 08, 2014, at 1:04 AM, imDanielle2 wrote:

    Thats funny.. What happened to the other article saying Ford was in default of the 6.8 Billion that they owed the U.S. taxpayers? How come Ford just dropped over 800 jobs here in Kansas City a couple months ago also and shipped them from the truck plant here to their new truck plant in Mexico.. Rumored that many more KC jobs will be going to Mexico also.. I guess making those new aluminum trucks is more expensive so Ford has to make that money up somewhere.. Hire cheaper Mexican labor I guess...

  • Report this Comment On April 08, 2014, at 8:48 AM, eagleslosers wrote:

    "...cut the weight ... also using renewable materials like wood fibers ..."

    $6B for wood fibers, aluminum, and roof-mounted solar panels.

    Gee wiz; excuse me for yawning.

    When Ford is able to CREATE and PRODUCE a vehicle as good as the Tesla Model S, you may then count me as impressed.

    Until then, may Ford enjoy its bailout.

  • Report this Comment On April 14, 2014, at 4:40 PM, ffbj wrote:

    Ford would certainly like to be perceived as innovative and green. Whether they will get there remains to be seen. It is sort like that David and Goliath thing referencing that recent interview.

    Whereas Goliath/Ford is perceived as the behemoth that will crush the upstart David/Tesla, but to borrow the analysis the roles are actually reversed since Tesla is nimble(innovative) and quick, and almost religiously inspired as the actual David truly was, arrayed against the slow moving, armor festooned, short-sighted, Goliath, or in modern context, the overburdened bureaucratic management, at odds with it's workforce and suspicious of innovation. A company like Ford.

    Sure Ford could make a mass market ev if they really wanted too, and it would probably be ok, but I don't think they really want to, but they want us they to think they do, since it is good pr.

  • Report this Comment On April 14, 2014, at 4:43 PM, rustianowski wrote:

    Tesla, is working with a very limited market and it doesn;t look like their vehicles will be affordable to the average consumer anytime soon. All ford has to do is make electric vehicles that are affordable and it could technically push tesla out for good.

    All they would have to do is change the plug for ford electric vehicles and if they were the majority you wouldn't be able to charge your tesla anywhere essentially pushing them out of business.

    If tesla wants to really make it in the auto industry they need to produce some models that average consumers can afford and would want.

  • Report this Comment On April 15, 2014, at 4:32 AM, sofiacaden wrote:

    The US auto industry announced the arrival of spring with auto sales numbers for March picking up pace, a welcome change from disappointing numbers reported this winter.

  • Report this Comment On April 15, 2014, at 7:57 AM, Nicopernicus wrote:

    Ford should have taken the money and revised its R/D to expand on tech and innovation on the battery side without putting wheels under it., Therein lies the real problem that no one yet has put on solid ground before its inserted in a vehicle. The marketplace be damned for the moment., take the risk and find something worth the future sales.

  • Report this Comment On April 15, 2014, at 9:21 AM, XXF wrote:

    Energy density of batteries has increased as we've been able to effectively utilize lighter alkali metals. We're now using the lightest alkali metal, Lithium, to chemically store energy, a process we may get marginally better at over time, but for the people saying we need investment in battery technology what research avenues appear particularly promising?

  • Report this Comment On April 15, 2014, at 9:28 AM, flightning wrote:

    Tesla makes the "Safest car ever tested" and Ford makes a gas/electric C-Max and you think Ford might be beating Tesla at it's own game?

    Tesla has already beaten every auto manufacturer, auto dealer, and oil company, at their own game.

  • Report this Comment On April 15, 2014, at 10:42 AM, drax7 wrote:

    How can you compare a ford to a tesla, that is pure nonsense. Quality performance safety and maintenance all favor a tesla over that pile of junk ford makes.

    Tesla is a pure American auto, and what musk has achieved is pure genius.

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