Moreover, Mr. Musk caused a net loss of manufacturing jobs. Suppose the $4.9 billion he wrested from the government had instead been distributed to the private business community through lower taxes. The annual average cost of a manufacturing job in the United States, including pay and benefits, approximates $81,300. That means private businesses would have created approximately 60,000 manufacturing jobs if they had received the same financial support government showered on Mr. Musk. His three lavishly subsidized businesses have thus caused a net loss of 25,000 manufacturing jobs. Sorkin’s effusive praise of Musk as “a prime example of everything we want our business leaders to be” is nonsense on stilts.
Los Angeles entrepreneur Elon Musk has built a multibillion-dollar fortune running companies that make electric cars, sell solar panels and launch rockets into space.
And he’s built those companies with the help of billions in government subsidies.
Tesla Motors Inc., SolarCity Corp. and Space Exploration Technologies Corp., known as SpaceX, together have benefited from an estimated $4.9 billion in government support, according to data compiled by The Times. The figure underscores a common theme running through his emerging empire: a public-private financing model underpinning long-shot start-ups.
“He definitely goes where there is government money,” said Dan Dolev, an analyst at Jefferies Equity Research. “That’s a great strategy, but the government will cut you off one day.”
The figure compiled by The Times comprises a variety of government incentives, including grants, tax breaks, factory construction, discounted loans and environmental credits that Tesla can sell. It also includes tax credits and rebates to buyers of solar panels and electric cars.
From Enron to Bernie Madoff, at the end of every great American financial scandal, the totality of the perpetrators’ greed seems to be matched only by the public’s incredulity at how such a thing could be allowed to happen.
And thanks to Elon Musk, there’s a good chance we may all be asking this question again soon.
The Senate Finance Committee and the House Ways and Means Committee have launched a probe into tax incentives paid to solar companies, according to the Wall Street Journal. The committee probes, led by their respective Republican chairmen, Rep. Kevin Brady of Texas and Sen. Orrin Hatch of Utah, have found an appropriate and disturbing target to begin this work.
SolarCity, a solar installation company set to be purchased by Tesla Motors Inc., is one of the seven companies named in the initial investigation.
Renewable Crony Capitalism
Already grossly subsidized, Musk’s SolarCity has become an albatross of waste, fraud, and abuse of taxpayer dollars. As legitimate earnings and cash become even scarcer for SolarCity, its entanglement in the Tesla empire suggests that a drastic reckoning is not only imminent but emboldening Musk to become more outlandish and reckless.SolarCity has been doubling down on the failed model of taxpayer support.
Notably, SolarCity is run by Musk’s cousins, Lyndon and Peter Rive. During his chairmanship at SolarCity, Musk’s family enterprise has taken in billions of taxpayer dollars in subsidies from both the federal and local governments. But the subsidies and sweetheart deals were not enough, as losses and missed projections continued to mount.
Ultimately, rather than endure the embarrassment of collapse and further damage to the public image of Musk and Tesla, the cousins conspired to have Tesla simply purchase SolarCity this year. The conditions of the deal screamed foul play.
To say nothing of what sense it might make for an automaker to purchase a solar installation company, Tesla stockholders were being forced to absorb a failing, cash-burning company and pay top dollar to do so.
While cost-cutting and corporate restructuring should have been the priority for a company swimming in debt and burning through available cash, SolarCity, in fact, has been doubling down on the failed model of taxpayer support. The desperate thirst for handouts has manifested itself in some of the murkiest political waters imaginable.
Thanks to Musk’s cozy relationship with New York Gov. Andrew Cuomo, a Democrat, the state has granted at least $750 million of its taxpayers’ money to SolarCity, building the company a factory and charging it only $1 per year in rent.
It would be hard to imagine such an operation would not be lucrative for its shareholders. And yet, somehow, SolarCity has never made a profit.
The vision is appealing, but in the short run it looks challenging. Tesla may have surprised investors by turning a narrow — and rare — profit in the third quarter, but the vast bulk of its current $28 billion market capitalization is predicated on Mr. Musk’s turning the company from a niche supplier into a truly mass manufacturer of electric vehicles. Tesla’s shares have fallen about 16 percent since the company unveiled its SolarCity bid in June, reducing the value of the all-stock deal to around $2 billion.
Hitting a self-imposed target of cranking out 500,000 cars per year by 2018, from a current run rate of around 100,000, already looked daunting. Tesla, after all, has a history of missing production and sales targets; its Model X S.U.V., for example, was delayed by problems with its falcon-wing doors.
Now Mr. Musk and his team also have a major acquisition to worry about. Throw in his continued role as chief executive of the rocket venture SpaceX, and he has a lot up in the air. Moreover, to deliver on its promises, Tesla will probably need to ask investors for fresh capital at some point next year.
For most chief executives, all this would make 2017 a make-or-break year. But Tesla investors’ overwhelming support of the SolarCity deal suggests that Mr. Musk is in a different category. Even if the wheels start to come off, he will probably be able to persuade the faithful to keep him in place and to hand over more cash. That may make Mr. Musk’s all-electric vision a self-fulfilling prophecy, no matter the cost.
Elon Musk has controlling stakes in 3 companies: Tesla, SolarCity, and SpaceX. Tesla and SolarCity are publicly traded. SpaceX is not publicly traded. This document’s focus will be soley on the financial interdependencies of the companies. There are also incestuous business practices, and nepotism within the leadership of each company Musk controls.
We hope to illustrate simply and clearly the immense risk the US government has taken with your money by giving it to a man who is essentially telling them what they want to hear while picking their pockets doing it.