What the hell is this?

Mother Muckraker is an internal newsletter at the now defunct New United Motor Manufacturing, Inc. (NUMMI) in Fremont, CA. The newsletter seeks to debunk the lies and misinformation spread by Toyota and their "company activists"; and more importantly, inform NUMMI union employees about the real reason why Toyota closed their award winning auto plant on April 1, 2010. NUMMI is dead, but Mother Muckraker lives on to serve as a testament to the greedy machinations of Toyota management. Stay tuned for updates.

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Sunday, May 23, 2010

Tesla and Toyota NUMMI Deal Timed to Coincide with IPO


Tesla is about to go public. When there's a IPO in the making, you can bet there'll be a clanging of gongs and bashing of cymbals to get investors to buy their stock. They want to be as vague as possible with the facts while painting a picture of a prosperous future. It starts with a story.


The storybook version of how this all came about was that Mr. Toyoda wanted to test drive a Tesla roadster. Elon Musk willingly obliged and away they went driving around. Mr. Toyoda hops into the Tesla roadster, Dukes a Hazzard style, puts the pedal-to-da-metal , burn some rubber and impresses Musk with his aggressive attitude. They became fast friends as they were both auto enthusiasts and decided to work together and make electric cars skipping off hand in hand merrily into the sunset. That's bullshit.


The press releases make it sound like this was done on the fly; but really, it was planned for a long time. Tesla gave clues to their decision to acquire the NUMMI plant at least a couple months ago when they were saying they were going to build a plant in Downey. This is from 4/29/10:


http://www.egmcartech.com/2010/04/29/tesla-to-announce-model-s-production-location-in-coming-weeks/


Tesla Motors plans to announce in the next several weeks that it has chosen a new plant to produce its new Tesla Model S sedan, CEO Elon Musk said in an interview with Automotive News.


Musk said that Tesla is hitting 50 to 60 individuals a month with a focus on vehicle engineering and production specialists. It said that it has two finalists to supply 80 percent of the parts that will be used on the Model S, due out in 2012.


The new plant will be on the West Coast and will build the Model S sedan and the replacement for the Tesla Roadster.


Musk said that Tesla will convert an existing factory but declined to say whether the plant had been previously used by other automakers (we’re guessing he’s talking about NUMMI here).


“It hasn’t yet been finalized,” he said. “We’ve almost fully negotiated the deal, but it has not been signed yet.


This deal was in the works for quite some time.


When 2 companies get together, there are mutually agreed upon terms that benefit both and it's discussed with their attorneys and accountants present and financial statements laid out. Future goals are discussed to see if it will benefit each other. People are sitting around a table talking about numbers and projected sales, not galavanting around on a Sunday drive.


Don't fall for their self adulating feel-good propaganda; instead, look at the numbers and facts. Toyota only invested $50 million in this deal. Their contribution towards our measly "Retention Package" was $250 million. NUMMI payroll was $500 million per year. $50 mil. is chump change. Does Toyota have faith in this deal? Toyota is not putting a whole lot on the line as far as money is concerned.


What Toyota is concerned about is their recent image problem. They had a record number of recalls and they closed their first and best plant, NUMMI. This recent publicity allows Toyota to reframe themselves as "green" and a company that "provides jobs". It's cheap publicity.


This deal also suggests that Toyota's electric vehicle technology is lacking somewhere and they need something from Tesla. When companies make a move like this, they won't take it unless there were numerous benefits. Not only does Toyota get to greenwash themselves to their prospective customers, but they now have a foothold in their competition's business. If Tesla fails, it would be an opportunity for Toyota to buy out the rest of Tesla and make "Tesla" Toyota's line of electric vehicles much like "Scion" and "Lexus" sells a certain type of car for a specific market.


In this deal, Tesla is the one that is taking most of the risk, not Toyota. There are some significant obstacles for Tesla to overcome.


The $450+ mllion government stimulus money for Tesla will only be given under certain conditions. One being that Elon Musk must own a certain minimum % of the shares or the government will consider Tesla to be in default and the stimulus money will be withdrawn. Elon Musk is in the middle of a divorce and his wife wants, among other things, a 10% stake in Tesla. If she receives that 10% and Elon's stake in the company falls below a certain threshold, that $450+ million will be withdrawn and Tesla will fail. This is where Toyota can step in and "bail out" Tesla by pumping more money into Tesla or buying it outright. Toyota has tens of BILLIONs in Cash and buying Tesla would be easy to do.


And how much money will this IPO raise? Some unconfirmed reports on the internet suggests the target is ~$2 billion. Will people buy their stock? Will people think Toyota's backing is good enough or will people see Toyota's $50mil. investment as a lack of faith in Tesla? Will investors feel that Tesla can sell lots of electric vehicles?


Tesla has sold only 1000 of the $100k roadsters so far and total sales of all electric vehicles are about 5,000. Tesla expects 20,000 coming out of NUMMI when they start producing a $50k vehicle. Going from 1000 to 20,000 a year is quite a stretch. Will 20,000 people buy a $50k electric car? We have no details on that vehicle other than a few pictures of the "S Model". Will the Toyota name brand be attached to these vehicles? Will the "S Model" be sold in Toyota dealerships?


Keep in mind that people will not be hired at NUMMI if there are no sales. So far, nothing they're saying is a done deal. There are more questions than answers.


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