Instead of putting taxpayers on the hook for only picking "the losers," as Romney snickered to President Obama in an October 2012 debate, the bigger issue is the government's lack of compensation for picking winners such as Tesla. Case and point is Tesla's recent announcement it will repay $465 million in loans received under the Department of Energy's Advanced Technology Vehicle Manufacturing Program (ATVM) by late 2017, five years ahead of schedule. While Tesla and its founder Elon Musk are right to frame the company's ATVM loan repayment within the context of the success of the company's Model S electric car, the early repayment is most relevant to Tesla's shareholders, who've benefitted from an over 100% gain since the company's 2010 initial public offering. Were Tesla to repay its ATVM loans in full ahead of a 2022 maturity, deeply discounted warrants held by the Department of Energy (DoE) for over 3 million Tesla shares will be cancelled, according to company spokesperson Shanna Hendriks. The 3,090,111 government-held warrants, some of which Tesla says are priced at an exercise price of $7.54 and some carry an exercise of price of $8.94 a share, according to the company's most recent annual report, currently stand at a profit of roughly $100 million at Tesla's current $41 stock price. Unfortunately for taxpayers, Tesla's early repayment of ATVM loans will likely expunge government's cheaply priced warrants, which are exercisable between December 2018 and December 2022, according to company filings. "If we prepay the DoE Loan Facility in part or in full, the total amount of shares exercisable under the warrants will be reduced," Tesla says in a 10-K filing with the Securities and Exchange Commission. A DoE spokesperson wouldn't disclose the exact financial arrangement of Tesla's ATVM loan balance and the government's warrant, however, Hendriks confirmed that the warrants would basically disappear, if the company were to fulfill its plan for a 2017 repayment. It's obvious that the government-held warrants don't have the teeth of those that Warren Buffett of Berkshire Hathaway ( BRK.A) hooked into the likes of General Electric ( GE), Goldman Sachs ( GS) and Bank of America ( BAC) during the financial crisis and which are all poised to pay off handsomely. Tesla likely wouldn't be in such a race to repay its low-priced government financing were it not an easy way out of discounted warrant contracts. Meanwhile, an Oct., 3, 2012 blog post from Musk indicates the DoE initiated Tesla's planned early ATVM loan repayment. "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 wrote. "
Overall, Tesla's success and its ATVM loan repayment are best characterized as a small victory for taxpayers alongside the overall program, even if the DoE appears to have left money on the table. Spurring the development of the electric car and the infrastructure necessary to support its adoption at a minimal cost to taxpayers is likely to enrage only the most ardent budget deficit scolds. Even potential losses to the overall program are likely overstated. The DoE says on its web site for ATMV that the program is responsible for about 60,000 jobs,
Mitt Romney was both factually and economically incorrect to lump Tesla and ATVM within a list of stimulus "losers" such as failed solar panel manufacturer Solyndra. A better gripe for the former Bain Capital head would be that the program was structured so taxpayers received only indirect gains from successes such as Tesla. "The purpose of the DOE Advanced Technology Manufacturing Program was to serve as a catalyst for accelerating sustainable transport technology, which is in the best interests of all Americans and ultimately people throughout the world," Musk said in his Oct. 3 blog post. -- Written by Antoine Gara in New York. Follow @antoinegara