During the first US presidential debate, candidate Mitt Romney rattled off a list of what he apparently thought were examples of the Obama administration’s failed promotion of “green” technologies:
But don’t forget, you put $90 billion, like 50 years’ worth of breaks, into—into solar and wind, to Solyndra and Fisker and Tesla and Ener1. I mean, I had a friend who said you don’t just pick the winners and losers, you pick the losers, all right?
Solyndra is the solar panel company to which the US Department of Energy loaned $535 million before competition from cheaper panels from abroad drove the company into bankruptcy. Fisker is a maker of luxury electric vehicles that has been troubled by product recalls. Ener1 received a $118 million loan from the Department of Energy before going bankrupt.
But Tesla does not belong on this list. When preparing his debate notes, Romney or his handlers probably included it because on September 25, SEC filings suggested that the company was behind in production of its new Model S sedan, which would negatively affect revenue. The same filing revealed that Tesla would be restructuring its $465 million loan from the Department of Energy, in what seemed like an echo of the issues that afflicted Solyndra.
What Romney missed, however, was a blog post from Tesla CEO Elon Musk that he published mere hours before the debate, in which he clarified that the reason Tesla restructured its loan with the Department of Energy is that Tesla has so much money, it can afford to pay the loan back early.
The DOE’s desire for advance payment of the overall loan stems from a concern that is the complete opposite of what many assume. The DOE believes Tesla will be highly successful and accumulate a large amount of cash, but that we may then choose not to pay off the loan any sooner than is currently required. Far from being worried about our survival, the DOE is highly bullish about our future and doesn’t want us to delay early repayment of the loan if we have the cash on hand to do so.
Musk also notes that Tesla will be cash-flow positive by the end of November.
Romney’s larger point, that the loans made by the Department of Energy constitute a kind of industrial policy, is still valid. And whether and how a country should administer its industrial policy in a time of both economic sluggishness and ballooning debt is a perfectly legitimate debate. But picking on Tesla, which has the potential to be the most visible success story of the DOE’s loan guarantee program, probably wasn’t a good idea.