Tesla Discloses Terms for Toyota Investment and Purchase of Former NUMMI Plant
By John O'Dell May 28, 2010$42 Million Covers Building and Land, but Not Equipment; Funds to Come from Tesla IPO
By John O'Dell, Senior Editor
Tesla Motors says in a regulatory filling this week that it has agreed to pay Toyota Motor Corp. $42 million from the proceeds of its upcoming public offering for the former New United Motors Manufacturing plant and 207 acres of property.
The acquisition doesn't include the plant's auto-making equipment or an additional 200 acres of property at the site (right) in Fremont, Calif.
The plant equipment is to be sold at auction by Toyota and Tesla will be able to bid on items it wants.
The Northern California-based electric-vehicle maker also reiterated in its Securities and Exchange Commission filing that terms of the Toyota-Tesla technology sharing agreement that shook the industry when announced last week are still being worked out and that the companies do not have a binding agreement to work together.
Do or Die
Further, the filing shows that Toyota's agreement to invest $50 million in Tesla is contingent on Tesla going public by the end of the year. If economic conditions or other events prevent Tesla from launching its initial offering by Dec. 31, the capital investment deal is subject to renegotiation.
Those terms have touched off a bit of worry in some quarters that the Toyota-Tesla deal is shakier than first imagined.
But the cautious language it typical of SEC filings, which usually are couched in worst-event terminology so that companies can't be accused by the commission of falsely inflating their value prior to a stock offering.
Ricardo Reyes, Tesla's vice president for communications, said in an interview this morning that deal-making with Toyota is moving forward as planned.
"We never said we had a detailed agreement, we told everyone right from the start that we did not have specifics," Reyes said.
The SEC filing characterizes the deal, announced last week, as "intention to cooperate on development of electric vehicles...."
Engineers Visit
In the filing, Tesla says it does not yet have "any agreements with Toyota for any such arrangements" and adds that there is no guarantee any agreements will be reached.
"But a group of Toyota engineers flew in just yesterday, from Japan and Michigan, and were visiting with our engineers" at Tesla headquarters in San Carlos, Calif., Reyes told Green Car Advisor.
"That's how you do a deal like this. You agree to do do it, then you work out the details."
That Toyota reserved the right to withdraw or renegotiate its $50 million investment if Tesla doesn't launch its a stock offering this year "is just good business sense," Reyes said, adding that Tesla fully expects to begin the initial public offering later this year.
Indeed, it would have been negligent on Toyota's part to have agreed to make an investment of that size without putting some limitation on the whens and hows of the cash infusion.
In the deal, Toyota said it would make its investment at the close of Tesla's public offering this year - its stake in electric car company dependent on the amount of stock $50 million would purchase.
Factory Terms
Commenting on the factory purchase arrangements, Reyes said that its purchase of the building and land doesn't include equipment "because we've been buying manufacturing equipment all along, we have a lot in Michigan, and some of the machinery at the plant is specifically for making Corollas, which won't help us."
Tesla plans to use the factory initially to build its $50,000 Model S electric sedan, scheduled to start production in 2012, and to follow that with production of a smaller, more affordable EV that could sell for $30,000.
It is in that second phase that Toyota could come back into the picture, using some of the plant - located in Fremont, Calif., close to Tesla's headquarters - to build EVs of its own.
Those cars could be jointly developed with Tesla under the agreement the companies are developing, but Toyota also has plans to continue development of electric-drive vehicles on its own.
Tesla CEO Elon Musk said earlier that he expects to hire about 1,000 workers for the Model S program and that employment at the plant eventually could reach the same level - about 5,000 - as when it was in full swing as a joint operation of Toyota and General Motors Corp.
He said that many of the workers would be recruited from the thousands of people laid off when Toyota closed the huge plant in April.
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