Straight Talk from Al Jacobs
THE BLAME GAME
In the recent contest to secure the $5 billion Tesla Motors battery manufacturing plant, California lost out to Nevada. In seeking to place the blame for the loss, it’s easy to single out the perpetrators.
Most certainly California Governor Jerry Brown’s unwillingness to match Nevada’s reported offer of $1.3 billion in tax subsidies, spread over 20 years, can be cited. Nor may we ignore the 120 legislators who, during the past several decades, converted the business-friendly Golden State into a business-breaking welfare state. And lastly, we mustn’t overlook the countless pettifogging regulators at all levels who encourage profitable firms to flee the state.
With that said, let’s consider whether California is worse off for its loss. Is pouring $1.3 billion or more of taxpayer money into Tesla for the promise of securing 6,500 manufacturing jobs a wise investment? With the firm’s prospects highly touted and its common stock in the $270 range, it certainly appears sound, but let’s look more closely.
The company’s claim of 2013 profits is possible only because of revenue from the sale of “Zero Emission Vehicle” (ZEV) credits. Without this income, the company continues to show the same sort of losses generated since its inception. It can be argued that reported profits are pure illusion.
But basic to Tesla’s future will be their ability to produce vehicles which meet the demands of large numbers of prospective purchasers at a price they will pay. To date they haven’t done so. If the political climate changes before viability can be achieved, I see nothing but insolvency in their future.
I’ll conclude with these thoughts: Much is wrong here in Calanirvana. I choke on the taxes and fees we citizens are forced to pay, shudder at our possessing the nation’s highest state welfare load, and even disapprove of our proposed high-speed choo-choo train. However, Governor Brown’s decision on Tesla is right on the mark.
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