THE AUTOEXTREMIST

June 30, 2010

Caution: You’re entering the Notgonnahappen.com Zone.

By Peter M. De Lorenzo

(Posted 6/29, 3:30PM) Detroit.

“You're traveling through another dimension, a dimension not only of sight and sound but of mind; a journey into a wondrous land whose boundaries are that of imagination. That's the signpost up ahead — your next stop, the Twilight Zone.”

- Rod Serling

Little did I know that one of the most creative television shows from the late 50s-early 60s - The Twilight Zone, by creator Rod Serling – would seem so eerily appropriate in these “Dog Days” of summer. But there’s certainly enough craziness and weirdness – and cessation of rational thinking - to go around right now to make even the most seasoned observers in this business stop and ask, WTF?

Let’s start with the whole Tesla Motors charade. As in are you kidding me? Really? The frenzy going on out there right now for the Tesla IPO is simply stupefying. Are people really that gullible, naïve, flat-out stupid, etc., etc., enough to talk themselves into going “all-in” on a glorified kit car company that has managed to cobble together 1,000 wildly overpriced $100,000 sports cars for sale in the entire history of the company? And that has managed to lose $246 million over the last three years while doing it? And now they want to raise money in an IPO to allegedly – and I mean that in the strongest possible terms – build a new “Model S” that will supposedly be “affordable” at $50,000 and will instantly transform the auto industry overnight?

Remember the old adage that there’s a sucker born every minute? Memo to all of you out there screwing yourselves into the pavement while chomping at the bit to get a piece of the action: Welcome to the Club.

A Club, by the way, that was unfortunately endorsed by the rumbling, bumbling, stumbling idiots in our Federal government at the Department of Energy who ponied-up a staggering $465 million loan to Tesla so they could build a Shiny Happy Green factory that would build Shiny Happy Green Smiley cars someday that will more likely than not never see the light of day, at least not in the volumes that anyone is dreaming about anyway. 

As a matter of fact I will predict right now that this will be the current administration’s equivalent to the Northern Ireland/John Z. DeLorean fiasco that ended so badly. Don’t think so? Tell me what’s different? A bright, egomaniacal P.T. Barnum-like character with a vision and a plan - oh, let’s call it for what it really is - an idea that’s wrapped in a frickin’ wing and a prayer - but with not enough cash to see it all the way through and who manages to talk a government entity into partially bankrolling it.  Sound familiar?

What? The IPO makes it different? How so? That just means more investors will be hurting when it blows up real good. And what about the fact that Toyota “invested” $50 million in Tesla Motors? Well, let’s see, Toyota destroyed most if not all of the good will they had accumulated in California when they closed the NUMMI facility and threw their employees under the bus. So they throw $50 million at Tesla, let them exist in a tiny corner of the largely unoccupied NUMMI facility, tell them to hire back some of its workers and call it good. That’s not a ringing endorsement by any stretch of the imagination, that’s just Toyota distributing some guilt money around and trying to look like upstanding corporate citizens for doing it.

(Oh, I almost forgot, Daimler partnered with Tesla to develop an electric version of the Smart car, too, but this development is so insignificant as to barely even warrant a mention, by the way.)

The Bottom Line in all of this?

People want to believe in the electrification of the automobile as the savior of all mankind to the extent that they’re making stupid calls – and investments – on a business that they don’t have even the first clue about. Will the electrification of our transportation system be a factor going forward globally? Absolutely. But the electrification “revolution” will be confined to massive urban centers where these kinds of cars can and will – in certain applications - make sense. People have to remember that electrification will be just one part of a bigger picture of energy resources involving every possible combination of fuel on the horizon now, and some we haven’t even imagined yet.

Tesla? This company hasn’t made any sense since Elon Musk started popping-up on the daytime business TV shows selling himself as some sort of modern day reincarnation of Billy Durant, and the gullible minions started getting in line to kiss his aura. Remember that at the time this guy was riding the wave of the Chrysler and GM bankruptcies, exploiting Detroit’s “failures” for all they were worth and insisting every step of the way that he would not only “show” Detroit how it’s done but that Silicon Valley would be the new center of the automotive universe. And some pretty smart people who should have known better suspended all rational thinking long enough to get sucked in. And witnessing the stunning success of the IPO today, they’re still getting hooked by the minute.

Well, guess what? Elon Musk is “broke” by his own admission, and to make matters worse he’s in the midst of an ugly divorce that will be sure to – one way or the other – remove the whole enterprise from under his control.

And then who will be left holding the bag? Yup, you guessed it, our esteemed braniacs in the Department of Energy who threw money at Tesla on the come – which means the collective “us” out in the real world outside Washington, D.C., get stuck with the bill – and countless financial institutions and individual investors out there who were all looking for the next “silver bullet” and that “100 percent sure thing” that would have surely put them over the hump and on easy street.

Oh, and one more thing, let’s not forget the other giant electric pipe dream that is lurching toward trouble as you read this. It seems that Henrik Fisker (speaking of P.T. Barnum) is having some major financial problems with getting his much-vaunted $88,000 Fisker Karma plug-in luxury GT car off the ground. Production was supposed to start this year but now it has been pushed back until next year at the earliest. Wait a minute - didn’t Fisker get over a half a billion dollar loan from the government too? Yup, he sure did.

The automobile business looks so easy to the countless “experts” out there who just know if given the opportunity they’d do it better than an industry that has been up and running for going on 125 years.

Well, folks, it just doesn’t work that way, especially with new technology that requires massive research and development, and massive amounts of investment cash on top of that.

I’m all for the kind of creativity, innovation, vision and the pioneering entrepreneurial spirit that forged this industry from its beginnings. We will need all of that and more to solve this nation’s – and the world’s – energy needs going forward. But the history of the transportation business is littered with people who had a good idea and nothing else, whose runaway ego drove themselves – and their investors - to financial ruin.

I submit Exhibit A - Tesla Motors - and Exhibit B - Fisker Automotive - as the latest examples of entities with too much ego-infused hype, too much runaway hubris and too much blind faith in their abilities – and in OPM (other people’s money) – to let a nagging little thing like reality creep into the equation.

So to paraphrase the brilliant Mr. Serling…

There is a fifth dimension, beyond that which is known only to electric automotive dreamers. It is a dimension as vast as space and as timeless as infinity. It is the middle ground between light and shadow, between science and superstition, between common sense and abject stupidity, and it lies between the pit of man's fears and the summit of his knowledge – albeit limited – of the auto business. This is the dimension filled with rampant delusion. It is an area that we call The Notgonnahappen Zone.

And that’s the High-Octane Truth for this week.

See another live episode of "Autoline After Hours" hosted by Autoline Detroit's John McElroy, with Peter De Lorenzo and friends this Thursday evening, at 7:00PM EDT at www.autolinedetroit.tv.

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