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USA: Old NUMMI plant cuts costs for Tesla

By Alan Ohnsman
Bloomberg Newsmercurynews.com
Posted: 04/12/2012 03:52:48 PM PDT
April 13, 2012 7:32 PM GMTUpdated: 04/13/2012 12:32:05 PM PDT
Tesla Motors unveils new signage during a official reopening ceremony of the
Gilbert Passin surveys the 50-year-old factory where Tesla Motors plans to make electric cars, and he sees a manufacturing bargain.

The former engineer for Toyota Motor, Volvo’s Mack truck unit and Renault designed the secondhand Fremont plant. He equipped it with Ikea furniture and refurbished machinery to build battery-powered cars to take on the likes of BMW’s 5 Series, starting in about two months.

“The cost to set this up was very, very low compared to any new plant,” said Passin, vice president of manufacturing for Palo Alto-based Tesla. “Everything we are doing has a very good value return.”

Holding down plant costs is crucial to the success of Tesla, led by Silicon Valley entrepreneur Elon Musk and which has yet to record its first profit, because regardless of how many consumers may want environmentally friendly cars, no rechargeable vehicle will be economically viable unless it can compete on price with conventional models.

With the going price to build a North American auto plant averaging $1 billion, Tesla may have spent less than a third that much to buy, renovate and equip its factory. It paid $42 million for the plant in 2010, spent $17 million for some of its presses and machinery, and got other used equipment at a “fraction” of the original cost from parts suppliers including Tower Automotive, said Passin, 51.

Tesla on Feb. 15, when it released results for 2011, said that, based on its current business

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plans, “we have liquidity to reach profitability in 2013.”

The factory in Fremont is also something of a window into a half-century of U.S. auto manufacturing. Opening in 1962, it made Oldsmobiles, Buicks, Pontiacs and Chevrolets for the former General Motors. It closed in 1982, then reopened two years later as New United Motor Manufacturing Inc., or NUMMI, a joint-venture shared by GM and Toyota.

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