Toyota Buying Tesla Stake for Electric Car Tie-Up

Bloomberg / Business Week

 

Toyota Motor Corp., the world’s largest automaker, is buying a $50 million stake in the Californian electric-car maker Tesla Motors Inc. as automakers compete to offer low-polluting models in the U.S.

Tesla will also buy a closed Toyota joint-venture factory in California to build its Model S and other vehicles, Tesla Chief Executive Officer Elon Musk said yesterday. The companies said they’ll cooperate in developing electric cars, parts, production systems and engineering support.

The deal may help Toyota, the world’s biggest carmaker, compete with Nissan Motor Co. and General Motors Co. in selling electric cars in the U.S., where regulations on greenhouse gas emissions and fuel efficiency are pushing them to offer advanced vehicles. It may also help the Toyota City, Japan-based company’s image, battered by recalls, by reviving the New United Motor Manufacturing Inc. plant in Fremont, California, known as NUMMI.

“This seems like a good deal for both parties, especially Toyota, from being able to avoid the political fallout from shutting NUMMI down to being able to offer a new electric vehicle with just a low initial investment cost,” said Jeremy Anwyl, Chief Executive Officer at auto industry researcher Edmunds.com in Santa Monica, California.

Joining Daimler

The size of Toyota’s stake in Tesla hasn’t been fixed ahead of a share sale by Tesla, Musk said in an interview. Daimler AG in May 2009 invested about $50 million in Tesla, which is supplying battery packs to the Stuttgart, Germany-based company for a test fleet of electric Smart minicars.

In July, Daimler sold a portion of its share of Tesla to the German automaker’s largest investor, Aabar Investments PJSC, reducing its stake to about 5 percent.

Daimler “welcomed” Tesla’s partnership with Toyota, which “likewise has the goal of advancing electric vehicles,” said Brigitte Bertram, a Daimler spokeswoman for the automaker in Stuttgart, Germany. The Toyota-Tesla linkup “doesn’t impede” Daimler’s cooperation with the California automaker.

Toyota fell 1.9 percent to 3,355 yen in Tokyo, while Nissan dropped 3.4 percent and Honda Motor Co., Japan’s second-largest carmaker, declined 2.5 percent.

The tie-up brings Toyota, the world’s biggest seller of hybrid autos, together with Tesla, the only company now selling U.S. highway-legal battery-powered cars. Electric-car technology has been supported by U.S. policy makers including President Barack Obama as a way to reduce the nation’s oil use and dependence on foreign energy sources.

Obama set a goal of getting 1 million plug-in hybrids and electric cars on U.S. roads by 2015.

Nissan, GM

Nissan is preparing to introduce its Leaf electric hatchback, powered by a lithium-ion battery pack, in Japan and the U.S. this year. Nissan Chief Executive Officer Carlos Ghosn has set a goal of leading sales of rechargeable vehicles, which he estimates may make up 10 percent of global auto demand by 2020, and is spending more than 500 billion yen ($5.5 billion) developing electric cars.

GM plans to introduce its Volt plug-in car in October. The car will initially be marketed to drivers in California, which requires large automakers to offer some vehicles that emit little or no tailpipe pollution.

Toyota intends to offer a short-range, “urban commuter” electric car in the U.S. in 2012 and begin retail sales of a plug-in Prius hybrid the same year.

Toyota, which will continue to develop its own electric vehicle, said Tesla’s long-distance models give the Japanese automaker more options. Toyota said hybrids should remain a more practical option for most customers until electric cars become more popular.

Share Sale

Palo Alto, California-based Tesla has 2,000 reservations for the Model S sedan and intends to begin “volume” production of the car in 2012, with a projected annual output of as much as 20,000 a year. The company has delivered about 1,000 of its $109,000 Roadster electric sports cars, while losing more than $230 million.

Tesla hasn’t posted a profit in the six years since it was founded. The company plans to use proceeds from an initial share sale and a $465 million government loan to help produce the Model S, an electric car that is to cost less than $50,000 after a federal tax credit.

Fund Raising

Tesla aims to raise about $100 million from its share sale and has said it may use proceeds to pay for factories and equipment estimated to cost as much as $125 million this year, and for acquisitions.

“I’ve felt an infinite possibility about Tesla’s technology,” said Akio Toyoda, chief executive officer of Toyota, founded by his grandfather. “By partnering with Tesla, my hope is that all Toyota employees will recall that ‘venture business’ spirit.”

The company is backed by investors including Mountain View, California-based Google Inc.’s co-founders Larry Page and Sergey Brin, and the government of Abu Dhabi. Daimler, the world’s second-biggest maker of luxury vehicles, invested last May. Tesla said Musk told Daimler about the Toyota partnership on May 19.

The revival of NUMMI, for 25 years a joint venture between Toyota and the former General Motors Co., will create 1,000 jobs, California Governor Arnold Schwarzenegger said. The plant closed in April.

Chrysler Whistle-Blower's Tip Brings U.S. Charges of Global Bribery by Daimler

The Detroit Free Press

WASHINGTON – Nine years ago, Chrysler auditor David Bazzetta was shocked to hear from DaimlerChrysler executives in Germany that the company regularly bribed foreign governments for business – even though they knew it violated U.S. law.

That whistle Bazzetta blew will finally be answered next week, when Daimler appears in a U.S. federal court in Washington on charges it spent hundreds of millions of dollars on payoffs to officials in 22 countries between 1998 and 2008. Several outlets reported that the company will pay $185 million to settle the charges, but the company and the U.S. Department of Justice declined comment.

So too did Bazzetta, 54, of Macomb Township, whose 2004 lawsuit first revealed the secret accounting system Daimler ran to pay off officials from Greece to North Korea, and included kickbacks to Saddam Hussein’s government under the United Nations’ “oil-for-food” program.

According to his lawsuit, Bazzetta, an 18-year veteran of Chrysler, warned about the payments to his boss. When he told Bazzetta to keep quiet, Bazzetta went over his head. When nothing was done, he was transferred, and eventually fired in January 2004, two weeks after his corporate protector retired.

At the time, DaimlerChrysler was trying to recover the aura that surrounded its creation, washed away by Chrysler’s struggles and anger in the United States that the “merger of equals” had given way to a German takeover of Chrysler.

The Justice Department said today that all told, Daimler’s bribes generated at least $50 million in pretax profits.

At the time of its 1997 purchase of Chrysler, Daimler had 200 accounts used for bribes around the world. By 2004, it had winnowed such accounts to 40, but the Justice complaint says the company only eliminated the practice after the launch of probes by U.S. officials.

The kickbacks weren’t just handed over in cash. Daimler paid for tourist trips for Chinese officials, and gave the son of a Chinese government official an internship, a four-month job and help getting him and his girlfriend German student visas.

The company also gave an armored Mercedes sedan worth 267,000 euros to a Liberian government official in 1999, and sent another worth 300,000 euros to a high-ranking official in the Turkmenistan government in 2003, likely late president-for-life Saparmurat Niyazov.

Daimler’s distributor also tried to get in Niyazov’s personal graces by spending $250,000 on translating 10,000 copies of his personal manifesto from Turkmen into German, delivered to Niyazov in a golden box. Daimler eventually sold 879 vehicles in the country from 2000 to 2008.

Bazzetta’s lawsuit sparked a probe in 2004 by U.S. Securities and Exchange Commission officials. The payments fell under the U.S. Foreign Corrupt Practices Act since DaimlerChrysler’s shares were traded in the United States, and several bribes were routed through U.S. bank accounts.

Daimler responded to Bazzetta’s suit in 2004 saying he had been fired because he falsified internal financial information and directed subordinates to do the same. It said Bazzetta's whistleblower claims had no merit because corporate officials were addressing the practice.

The automaker settled the suit out of court in 2005, but later admitted in 2006 that its own investigation had found “improper payments” in Africa, Asia and Eastern Europe, and that several employees had been dismissed.

The government and Daimler are set to appear before a federal judge April 1.

Daimler Acquires 10% Stake In Tesla Motors
A $50 million vote of confidence by the German giant
could give a jolt to Tesla's plan for an electric sedan
Story from Business Week

Electric car startup Tesla Motors has a new partner: German giant Daimler (DAI). On May 19, at the fashionable Hay-Adams Hotel in Washington, Daimler announced it has taken a 10% stake, worth about $50 million, in the San Carlos (Calif.) auto pioneer.

The two companies had already been working together. Daimler was planning to build 1,000 all-electric versions of its small Smartcar using Tesla's battery technology. But Daimler wanted more than just a simple supplier-customer relationship, explains Dieter Zetsche, chairman of the board of management of Daimler and head of Mercedes-Benz Cars. "We are in a time of change," he says. "This industry is going through a kind of paradigm shift, and has to reinvent itself ultimately to be independent of petroleum and without CO2 emissions. We need fast technology change."

Making changes fast is hard for big companies. So more than just looking to Tesla for new technology, Daimler wants an infusion of entrepreneurial spirit. "We want to think out of the box," says Zetsche. "We want to go down new paths, and we believe the combination of such a young, very ingenious company and a very experienced, longtime successful company is a good one in order to find new approaches fast."

Selling New Shares to Daimler

The deal brings credibility as well as money to five-year-old Tesla, which has garnered headlines for both its speedy Roadster as well as for its recent stumbles. "It validates the effort Tesla has made in pushing the electric vehicle," says Jeff Schuster, executive director for forecasting for J.D. Power & Associates (which, like BusinessWeek, is a unit of The McGraw-Hill Companies (MHP)). "It certainly is a boost to that company to have a company like Daimler investing."

Indeed, Tesla CEO Elon Musk says Daimler's prestige and technology were major factors in the deal, which involves selling new shares to Daimler. "We actually could have gotten a higher price from another investor, but we would have done so without the strategic advantages," Musk says. "It gives everyone a higher confidence in our plan."

That confidence has been shaken a bit recently. The Roadster had cost overruns and delays, and the company has suffered through layoffs and the firing of its first CEO. Now, Tesla has a plan to offer a less expensive but still speedy electric sedan, the Model S, for $49,900. But Musk needs $400 million more to put the car into production. He hopes to get much of that from two federal Energy Dept. programs to support green technologies. But he hasn't snared the funding yet, and some auto experts and ex-Tesla employees doubt the company can pull it all off. "There are lot more steps to go before Tesla is a viable car company," says George Peterson, president of automotive consulting firm AutoPacific.

Tapping Daimler's Expertise

Musk hopes that the deal with Daimler will help put some of the doubts to rest. "It's important to recognize Daimler is very meticulous," he says. "A huge part of their commitment is due to the Model S. They've gone through the Model S development costs line by line."

As part of the deal, Daimler will help Tesla with the new car's engineering. "Tesla is interested in some components, some knowhow, and some technology to add to their vibrant, very energetic startup approach," says Zetsche. In particular, Musk anticipates tapping into Daimler's expertise in areas like noise and vibration reduction, plus safety and quality. "They are very interested in helping us. They see us an important test case for market acceptance of electric cars," says Musk.

Tesla launched the Model S on Mar. 26. It claims to have more than 1,000 reservations for the all-electric sedan, which can carry seven people and travel 300 miles on a single charge. Tesla is asking for $5,000 deposits (or $40,000 for a special collectors' edition). The car won't be delivered until late 2011 at the earliest. "If they can get that thing on the road, they'll have a winner on their hands," says AutoPacific's Peterson. "The challenge will be to make an aluminum body at that price."

Daimler Investing in Batteries

There are questions as well for the whole auto industry as to which technologies will win out as it tries to respond to the demand for more efficient cars. Daimler is expecting that diesel-powered cars will be a major component of its strategy for meeting President Obama's tough new fuel economy standards. The company is working on hybrid gas-electric vehicles as well. But electric vehicles offer the potential for the greatest reduction in emissions. That's why Daimler has already invested in German battery maker Li-Tec, and has founded a joint venture with Evonik Industries to make its own batteries.

Zetsche says that Tesla's battery approach was "the fast one," but that he expects Li-Tec's version of the same basic lithium-ion technology to be more efficient. In the long-term, he expects, Tesla might consider using the Li-Tec batteries as well.

So Teslas may pick up a bit of a German accent. But don't expect the cars to be sold at Mercedes dealerships anytime soon. "In major markets, I want to control that customer experience," says Musk.