Chevy Volt a Failure - GM to Layoff 1,300

The batteries lose capacity over time. If you had access to a swappable battery at all times, it means that after 8, 10, 15 years, you would still have access to a fresh battery with full capacity. But by then, the battery that would have come with your car would have been only at 50, 60, 70 percent capacity. Who is going to subsidize the extra cost to keep new batteries in rotation to service all the cars with access to one of those stations? As it stands now, at some point you are going to have to pony up more money for a new battery when the capacity is degraded enough. There'd have to be something in place with that system that only gives you access to the station for a fixed number of years.

One logistical problem I can foresee also, you are SOL if you are in an area where all the swappable battery stations are out of freshly charged batteries.

 

The layoffs obviously paint a picture. But essentially what they were saying with the reduction in Model S and Model X production is that they have exhausted the demand there was for their $80,000 cars. This was pretty predictable, to me at least. When he announced the Model 3 with all of the hype, I posted something that just seemed like common sense to me. He was promising a car that was say, 80 percent (pick your number) as cool as the Model S, at less than half the price of the Model S. And that was with nonexistent margins on the Model S (because the batteries are so expensive). They were selling each of those cars at a loss. Unless he was a magician, I have no idea why anyone would have believed that crap. I actually don't think too many people who follow the company did believe it.

As for the stock, it has been a wonderful momentum play. But momentum can be totally divorced from anything fundamental. This is a simple story. As long as our credit markets are as distorted as they have been for the last 7, 8 years, you will have a survival of the unfittest world, in which zombie companies like this one can keep borrowing to stay alive. The minute the Fed made a halting move to try to change that environment, you started seeing cracks. Tesla can't borrow right now, and it has convertible bonds due on March 1. The conversion price is $359.88. If the stock price is above that on March 1, they can stick those poor lenders with its eventually-worthless stock rather than cash. If it is below that mark, Tesla will have to pay $920 million of what it has borrowed back. The stock price is current at $287. $920 million is A LOT of money for a company with a history of burning through a staggering amount of cash, not generating cash.

I won't call the end on this, because I still don't think the Federal Reserve is going to let the mess they created (which is what created Tesla) implode without going all in. History is my guide. They will go all in and cluelessly make the eventual credit crisis they are responsible for as bad as possible. So I won't be surprised if sometime this year, they completely reverse course, bring the Fed Funds rate back down to zero, even go negative (because it requires more and more drastic measures the higher the debt levels get) and get back into the bond buying business, with more quantitative easing. I hope I am wrong about that, but I am not hopeful. In that environment, if it does happen, Tesla might be able to get by longer. When you destroy the credit markets by robbing anyone who wants to save to fuel more and more debt, people will reach into batshit crazy things to get the return you robbed them of. ... i.e. -- the "dream" that article was talking about. It's no coincidence that you are seeing a "waking up from the dream" headline after the Federal Reserve started to try to get itself out of the corner it backed itself into.

 

1) They likely overpaid. They paid a 55 percent premium. 2) It is an all stock deal. They are using the overpriced stock as currency. Good for them. They should, while they can. They may as well be paying with monopoly money. In that environment, why not? 3) From what I read, it's a match made in heaven. Maxwell has had two run ins with security regulators, once for fraudulently inflating revenues, and once for repeatedly paying bribes to Chinese officials. That will slide right perfectly. 4) I have no idea if its technology is any good. But why is Tesla buying a company to boost an area that 2, 3 years ago, Tesla was telling everyone was already an area it had a competitive advantage?