PHOTO CAPTION: Tesla Model S could be manufactured in at controversial site in southern California.

Possible Tesla Plant Site Considered Unhealthy

Seth Sandronsky examines the past history of possible sites for Model S production.

Published: 27-Dec-2009

Financial aid from various levels of government is driving Tesla Motors Inc. to expand its production of jazzy electric cars and parts. But will the company make their clean-emission vehicles at a site that some say is unsafe?

Currently, Tesla finalizes assembly of 1,000 electric Roadster models annually in San Carlos, California, said Tesla spokesperson Ricardo Reyes. Tesla Roadsters are not cars for the masses. At least not yet. Roadsters sell for $110,000. They can drive 244 miles on a single battery charge with zero tailpipe emissions. Well-heeled buyers can see these autos at showrooms in the Golden State’s Silicon Valley and Los Angeles, and in London, Munich and Monaco. Away from these showrooms, though, issues of private wealth and the public power it shapes are clashing in Tesla’s bid to grow.

Tesla Gets Welfare

In June, the federal Department of Energy awarded a two-part loan totaling $465 million to Tesla. The loans came from the DOE’s Advanced Technology Vehicles Manufacturing Loan Program to help “automobile manufacturers and component suppliers to pay the cost of re-equipping, expanding, or establishing a manufacturing facility in the United States to produce qualifying advanced technology vehicles; or qualifying components; and, engineering integration performed in the United States of qualifying vehicles and qualifying components.” With the loan, Tesla plans to assemble its new Model S electric car; a sedan that would sell for $49,900 after a $7,500 federal tax credit and will be capable of driving 300 miles on a single battery charge. The company also plans to make electric auto parts at a site in northern California. The parts include batteries and power train components.

Asked about the ATVM loan conditions and the hourly pay of the Tesla work force, Julie Offner, a spokesperson for the ATVM loan program, said: "All of the loan applicants must agree to pay prevailing wages as determined by the Secretary of Labor.” In other words, Tesla must pay wages not lower than those prevailing at similar work sites locally. Here’s a challenge to that provision. There is only a single car factory in California operating now: the New United Motor Manufacturing Inc. plant in Fremont. This union employer (United Auto Workers Local 2244) is a former GM-Toyota joint venture. The plant is set to close April 1, the date both car makers have chosen to end their 25-year alliance. NUMMI is located across the San Francisco Bay from Tesla’s headquarters in San Carlos. There, the non-union employer has a global payroll of less than 500 employees, Reyes said.

The federal government is not alone in giving financial assistance to Tesla. The state of California aids the company, too. In late October, State Treasurer Bill Lockyer announced an agreement between Tesla and the California Alternative Energy and Advanced Transportation Financing Authority, which he chairs. The pact saves Tesla from paying just over 9 percent in state sales tax on $320 million in purchases of electric-car equipment from 2009 - 2011.

We turn from the federal and state help for Tesla to what’s on tap at the local level. In Los Angeles County the city of Downey is courting Tesla to manufacture electric cars at Downey Studios, a former site of Boeing and NASA operations. In late November, the Downey City Council approved a memorandum of understanding for $8.7 million in “economic development incentives” to the Industrial Realty Group, which Stuart Lichter owns, to attract Tesla’s electric-car making plant. Asked for the details of these incentives, Scott Pomrehn, a city spokesman, said the city is waiving $6.9 million of IRG’s future rent payments on 20 acres of property it leases from the city at the Downey Studios site.

Here it may be useful to recall economist Adam Smith. In his 1776 work The Wealth of Nations, he wrote of an "Invisible Hand" that guides the marketplace when individuals pursue their self-interest to buy and sell. This individualism, in turn, improves the common good if government stays away. His theory of the invisible hand of the market (replacing the visible hand of the monarch) holds no small sway in many circles today, even with the Great Recession currently. Readers can judge how Smith’s view holds up in the case of Tesla.

Counting the Electric Car's Benefits

A DOE press statement touts reducing “the nation’s dangerous dependence on foreign oil” as a public benefit that justifies spending tax dollars to help car makers like Tesla expand production. This logic is simple. The price of oil from foreign producers is subject to any number of market rises and falls. They range from military operations to market speculations. Against this backdrop, demand and supply for oil rarely if ever are in balance, for reasons such as imperfect information about future conditions. Accordingly, in an oil-dependent society such as the United States, households and businesses are vulnerable to price shocks. Developing electric vehicles reduces the nation’s reliance on the global oil market.

The recent climate conference in Copenhagen brought the subject of global climate change to the fore. Its causes and effects are become clearer with each passing day. The scientific consensus is that human activity, mainly in the developed nations since the Industrial Revolution, has added increasingly lethal levels of carbon emissions into the atmosphere. Its carbonizing -- from burning gas and oil for transit and coal for electric power -- is heating the planet. The impact is causing floods, melting glaciers and increasing ocean acidity, putting people, mainly those who live in the developing nations and are not guilty of over-emitting carbons to the same degree as wealthier countries, at risk of disease, drought and famine.

According to California State Treasurer Lockyer, electric cars are “a critical weapon in the fight against climate change." For U.S. Energy Secretary Steven Chu, “key technologies” such as electric cars can reduce the nation’s dangerous carbon emissions. The U.S. leads the world in such emissions on a per capita basis.

Designing and assembling electric cars also provides green jobs. Such employment can increase the energy efficiency of businesses and households. Both the DOE and state of California point to the potential of new job creation in the green-collar sector. Lockyer, in his recent tax-credit announcement for Tesla, stated that its electric car expansion would create 1,400 new jobs statewide.

Against this backdrop, the national job crisis is acute in California, with 2.3 million residents out of work in October 2009, up 808,000 from October 2008. The state’s jobless rate was 12.5 percent this October versus a national rate of 10.2 percent. Racial minorities bear a heavy brunt of unemployment in California. Its Latino workers are disproportionately jobless, with an unemployment rate 25 percent higher than blacks and whites statewide from October 2008 to October 2009, according to the state Employment Development Department. In the city of Downey, where Tesla may produce the Model S sedan, Latinos were 57.9 percent of the population in the 2000 Census versus 32.3 percent in the 1990 Census.

A Positive Project at an Unsafe Work Site?

In 2003, Stuart Lichter, who founded Industrial Realty Group and is its president and senior managing partner, bought 60 acres at the Downey site. Military-industrial use began there in 1929. That era ended in 1999 when the Boeing Co. departed. During those 70 years, workers labored on projects such as the Apollo spacecraft, Navajo missile and the space shuttle.

Earlier, Lichter worked for the federal General Administration Services. According to the IRG Web site, his real estate development company “is a leader in the conversion and privatization of federal properties, including closed military bases.” Under Lichter’s tutelage, a film production studio emerged at the Downey site. The studio features exterior and interior lots, and a 65,000-square-foot indoor concrete lake. Today, Downey Studios is a far cry from its past life as a former aerospace and military workplace.

Just ask Steve Basile, 53. He lives in Los Angeles and worked as a union carpenter building sets for “The Island,” a DreamWorks film production, at Downey Studios from September 2005 to December of that year. He left this job due to a back injury. But Basile’s health worsened before he stopped pounding nails there. “After a couple of days of working at the Downey Studios I got fever, sweats and burning skin,” he said, the same maladies afflicting some co-workers. “For a long time nobody believed us," Basile said. “Then some actors doing films at the Downey Studios six months ago became sick with the same symptoms we had in 2005.”

While Basile worked at Downey Studios, an attorney with his union (International Alliance of Theatrical Stage Employees Local 44) met with members there and said the site was unsafe for them to continue employment, according to Basile. However, he continued to work there to "pay his mortgage or lose my house," Basile said. Since leaving work at Downey Studios, Basile has had open heart surgery and contracted Hepatitis C. He also receives regular chemotherapy (pills and shots) for cancerous blood proteins.

On December 10, he joined members and supporters of the California Coalition for Workers’ Memorial Day at Tesla’s headquarters in San Carlos. Together, they urged the company not to expand in Downey, citing the ill health of Basile and other workers from their exposure at the alleged unsafe work site. Further, Basile and CCWMD members met with Reyes of Tesla, focusing in part on the Energy Department loans for the company’s possible expansion to Downey to produce the Model S electric car.

Lawrence Rose was a California Division of Occupational Safety and Health senior public health medical officer for nearly 30 years. He is now an assistant professor in occupational medicine at the University of California at San Francisco. “When you have a work site and many complaints of workers’ illnesses, you need to do a formal study of their health problems and contact the primary care medical evaluators,” Rose said. “My opinion is that is what should be done at the Downey Studios -- look at who is getting sick, where they work and what kinds of exposures they have.” According to Rose, no further development should proceed until such a study is completed.

Lichter did not return a phone request to comment on the alleged unsafe workplace conditions at Downey Studios.

Tesla’s Road Ahead

Tesla is not showing its cards about where it will produce the Model S sedan, slated to come on the market in fall 2011. But the clock is ticking. And the city of Downey is not alone in pursuing the company. The city of Long Beach, with a former Boeing factory that the company owns but no longer runs, seeks the new Tesla plant. The nine-member Long Beach City Council on December 8 approved an offer of financial incentives worth $28.6 million to help Boeing and to lure Tesla.

According to city council records, the incentives include a rebate of 50 percent of sales tax generated to Long Beach for a term of 10 years ($15.4 million); a $2 million loan with a term of 10 years for facility upgrades; and California hiring, use and sales tax credits ($10.4 million). Last, the city offers $800,000 for work force hiring and training services to Tesla.

According to Reyes, Tesla eventually wants to make 20,000 Model S sedans a year. “Deciding where to build our state-of-the-art, energy-efficient manufacturing home should be a deliberative process, and we intend to get it right,” he said. Reyes declined to say what and with whom Tesla is deliberating to make that choice. Meanwhile, a city-versus-city bidding contest for a new Tesla plant is surging.

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