Despite the fact that Ford Motor Company (F) suffered through a tough Q2 2012 performance in Q2 2012 due to the weakness in the European market, a slowdown in the Latin American market and increased marketing in Asia, it is still our preferred pick in the automotive industry. We like the fact that it undertook its restructuring earlier than its rivals and was able to decline a bailout from the Obama Administration. Despite the fact that it turned down welfare for the well-connected, it was the first of the Big Three Automakers to return to profitability, it was the first Big Three automaker to regain an investment-grade credit rating from the Big Three Credit Rating agencies and the first Big Three Automaker to reinstitute its dividend. Even though it faced a tough macroeconomic environment that pushed its Q2 2012 profits down by 57%, it still generated $1.04B in net income. In short, at least Ford Motor Company is Profitable and has begun paying down its Department of Energy Electric Car Development Loans and that’s more than what we can say about Tesla Motors (TSLA).

Government Aid

Tesla Motors was incorporated in 2003 in order to commercialize the T-Zero prototype electric sports car created by AC Propulsion. It introduced its first vehicle, the Tesla Roadster in 2008. The Roadster had a base sticker price of $109K and qualified for a number of taxpayer-funded incentives to those who bought one. Even with the $7,500 in tax credits, the base price on the Tesla Roadster is still $101.5K. For that price, we could buy four high-quality 2013 Ford Mustangs at $22,200 each and still have nearly $13K in cash back to pay sales tax, registration and even some options. In addition to the government paying people $7,500 to buy an electric vehicle, the Department of Energy gave it a $465M low-interest loan package. The company received its loan facility in 2010 and has already drawn down all but $33.2M as of Q2 2012. We believe that the company will more likely that not pay back its loan and the taxpayers will be on the hook. We think it is ironic that President Obama rails against millionaires and billionaires not paying their fair share and yet Tesla’s co-founder Elon Musk is a foreign-born billionaire corporate executive and Obama donor who sought $465M of the taxpayers’ hard earned money to fund Tesla’s electric vehicles, which we think are white elephants on wheels.

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