Might Tesla Buy Another Shuttered GM Factory?

NOV 27 2018 BY MARK KANE 116

So much free production capacity could equal a perfect purchase opportunity.

The recently announced transformation at General Motors, which will lead to shutting down several facilities in North America, opens a question of whether it could turn into a purchase opportunity for Tesla.

We assume that Model S, Model X and Model 3 will fulfill the production capacity of the Tesla Factory in Fremont (former NUMMI plant previously operated jointly by GM and Toyota). With the new models in the pipeline – Model Y, Semi, Pick-up and 2nd generation Roadster, Tesla will need more production space.

Tesla can expand the Gigafactory in Nevada, build an all-new facility – more suitable for modern, automated production – or maybe it already is expanding (some think that Lathrop facility will turn out to be a production site).

GM will end production at several sites next year, including Detroit-Hamtramck Assembly in Detroit where the Chevrolet Volt was produced.

  • Increasing capacity utilization – In the past four years, GM has refocused capital and resources to support the growth of its crossovers, SUVs and trucks, adding shifts and investing $6.6 billion in U.S. plants that have created or maintained 17,600 jobs. With changing customer preferences in the U.S. and in response to market-related volume declines in cars, future products will be allocated to fewer plants next year.Assembly plants that will be unallocated in 2019 include:
    • Oshawa Assembly in Oshawa, Ontario, Canada.
    • Detroit-Hamtramck Assembly in Detroit.
    • Lordstown Assembly in Warren, Ohio.
  • Propulsion plants that will be unallocated in 2019 include:
    • Baltimore Operations in White Marsh, Maryland.
    • Warren Transmission Operations in Warren, Michigan.

The NUMMI plant was purchased for about $42 million in 2010 and enabled the introduction of the Tesla Model S on the market two years later. The plant is big enough to handle the Model X and Model 3.

At the right price, Tesla could be tempted to buy some GM’s facilities. The question mark is that perhaps all these available facilities are too far from the Gigafactory that supplies batteries and other parts.

Separately, Michigan probably will lose some jobs because of GM’s move, so Tesla could set conditions that it will purchase the plant if the state will lift the ban for direct car sales.

Source: Electrek

Categories: Chevrolet, Tesla

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116 Comments on "Might Tesla Buy Another Shuttered GM Factory?"

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jelloslug

If Tesla were to buy a shuttered Detroit plant, that would go a long way to making them a replacement for one of the “big three”

ffbj

They stand alone as “The Big T.”

magama52

IMO, the problem of buying one of these plants would be the unions demands on Tesla. I don’t think Musk would or should deal with the unions.

Clive

The Union dies with the Plant.

They don’t just come back to life when a new owner turns the lights back on… 💡

Doggydogworld

Unions still control those states and local governments. Good luck getting permits to do anything.

robus

Don’t forget that GF2 is in New York State which has a heavy union presence. Tesla seems happy there…

Vexar

Tesla certainly won’t buy a factory in a state that doesn’t allow the sale of their vehicles, so you can scratch Michigan off the list with a razor blade. I mean, they are already in a lawsuit where the governor of Michigan doesn’t want to turn over emails between himself and the auto dealers network there. I can only imagine what would happen.

The real issue is that none of those states are near the lithium mines. I would sooner expect to see more in Nevada or maybe Wyoming. Wyoming would be awesome, I could see Tesla singlehandedly causing their DMV to have to upgrade to a six-digit license plate pattern!

(⌐■_■) Trollnonymous

Tesla should buy one of these facilities only if the State allows them to direct sell their products to customers.

If not, then let that dumbazz state deal with the Unemployment.

cfox

That’s not trolling. That’s a legitimately good point.

ffbj

His handle is not his occupation.

theflew

I hate speculations like this because GM would sell one of these plants for billions not the $42M Nummi went for because Toyota and GM didn’t want to be in that expensive location.

Taylor Marks

Supply and demand. GM has a supply of five, but how much demand is there? Tesla might be willing to buy one – is anyone else willing to buy anything? If not, GM’s choices are to just keep the property and do nothing but pay taxes on it, or sell it for however little Tesla wants to offer.

TomArt

That’s a good point – none of the domestics are looking for more factories – Chrysler group already dumped their small and mid-sized sedan models, and Ford is going to do the same thing. Ford will need some of that factory space for more SUVs and trucks, but probably not all of it. Why would they be looking for more?

Rivian could use some more factory space before long, and they already have the Normal, Il, factory – the Michigan locations are closer.

Rivian is also setting up a direct-sale model, so they could try to leverage the same thing that Tesla could.

Pushmi-Pullyu

Rivian is going to be spending a lot of money installing production line equipment in the one abandoned auto assembly plant they own. They now have very nice looking pre-production prototypes for their SUV and their SUT (which they call a “pickup”), but according to their timeline they are still more than a year away from mass production.

I very seriously doubt Rivian is going to be in a position to buy a second assembly plant for at least a few years.

drpawansharma

why would they pay tax on a property that is not earning anything. If anything, they may claim it as a liability and save some more taxes.

Clive

They pay property tax as long as they own it.

It’s still a huge savings and a huge write off with it vacant.

Ron M

Who’s gonna pay billions nobody. Rivian bought the Mitsubishi plant in Illinois for 16 million and it was only used for about 20 years.
I would think GM would be more than happy to unload it. Plus I’m sure the states would be thrilled to give millions to get workers employed with the knowledge that it would take at least 4 years to have a thousand workers in the plant.
If the building that’s going up near GF1 is actually a warehouse and not a factory. They could buy one of these factories to build the TMY or Semi.

Dante

Yeah I think the key point here is that automakers are suffering. No one except maybe Tesla and JLR have any desire to expand.

theflew

GM had records profits in 3Q. This is about them right sizing for the future. If you belive the EV/autonomous narrative – less cars will be sold, less maintenance, longer life spans, etc…

Dante

GM US sales were down more than 11% in Q3 2018 versus Q3 2017 (https://media.gm.com/dld/content/Pages/news/us/en/2018/oct/1002-gmsales/_jcr_content/rightpar/sectioncontainer_0/par/download_0/file.res/Deliveries-Quarter-3-2018.pdf). Profits are one thing, but they don’t seem to need the manufacturing space.

Get Real

Billions huh?
Dream on you serial anti-Tesla you know what.

Nix

I will sell you my used bubble gum for only a few million dollars.

See how sellers don’t determine price? The market does.

Scott G

Because they will have so many offers to buy them for “billions”?

Deepak

Elon should try Canada plant, as there are not many restrictions on Tesla in Canada and we Canadians love Tesla
Hopefully if Elon decides for Tesla to come to Canada, the Govt might even include some financial package. Worth a try

Joel B

As a Canadian, I’d be cool with this.

G2

Beats buying a freaking dilbit pipeline.

KumarPlocher

Doesn’t Tesla source a bunch of its Cobalt from Canada? I feel like I could see this happening.

Doggydogworld

Tesla doesn’t source cobalt. Panasonic buys NCA powder from Sumitomo Metal Mining. SMM mines the nickel and cobalt in the Philippines and makes the powders in Japan.

antrik

That’s going to change, though…

Adoreizi

Pretty interesting idea. Plus BC plans to implement an ICE ban by 2040 or something like that.

Clive

2040 is worlds away.

paul k

Canada has a single payer health system which isn’t perfect but is much cheaper per capita than the U.S. and is a draw for employers. The GTA is becoming a high tech hub with lots of talent graduating from our colleges and universities.
Please come to Canada Tesla. I might even be able to afford one if manufactured here.

Neromanceres

While that would be a nice idea they wouldn’t get Oshawa cheap. It’s a facility about twice the size of Freemont and that land is worth a lot of money (near lake Ontario with great access to hwy 401).

Nathanael

It’s true the location is super good. But maybe Tesla can afford it?

TL

It’s Fremont… and the price of land is twice that of Oshawa.

Clive

It was purchased for a song.

The timing was incredibly perfect.

Doggydogworld

CA politicians applied a lot of pressure on Toyota. They effectively exchanged NUMMI for shares in Tesla. Which worked out well for everyone. Except the UAW.

Nathanael

Oshawa plant is in an insanely good location, right next to the commuter rail station on the line to Toronto, access to highways, two freight railroads, and an actual port, and the site seems to be a full square mile in size. If Tesla can get it at a good price I would say they should buy it.

John Doe

Any Trump taxes?

YVES LAURIN

I’m a Canadian and I love the idea, but it will not happen. Market in Canada is to small. so they will have to ship most of the production across the border and that would add to the cost

David

No, we have a free trade agreement

Clive

They can build cars in Canada and drop ship or rail batteries from Sparks NA.

QCO

Factrs favouring the idea of a Tesla Oshawa facility:

– Tesla clearly needs a 2nd vehicle assembly facility fairly soon for model Y+
– Oshawa is closer to the Buffalo Gigafactory than Fremont is to Nevada
– The GTA area workforce has higher than average technical skills
– Oshawa plant is quite modern compared to other big 3 plants
– The new CETA agreement allows tariff free vehicle exports to Europe
– NAFTA/USMCA enables tariff free vehicle exports to US
– Oshawa is physically close to the northeast & east coast US markets
– Canada is less impacted by trade wars when it comes to materials
– Federal/provincial governments would want to provide financial incentives for green tech jobs
– Elon’s alma mater (Queens) is nearby and would fall over themselves to provide joint research support, training and other tie ins

The only problem is the high land value which could make to too expensive for Tesla, regardless of the loss GM takes on the book value. The land would be highly valued for major housing projects, especially since it has such good transportation connections with Toronto.

antrik

Don’t see why proximity to Buffalo factory would matter?…

J P DeCaen

Apparently, a BYD electric bus plant was slated for Ontario, but Trump wannabe Doug Ford, leader of Ontario government, killed the EV credit and that killed the plan. How about building some goodwill towards Tesla by reestablishing the credit. But who am I kidding? That’s not how right wing Trump loving populists do things.

TomArt

“Separately, Michigan probably will lose some jobs because of GM’s move, so Tesla could set conditions that it will purchase the plant if the state will lift the ban for direct car sales.”

oh, ho-ho!! That would be super awesome! Get those politicians where it hurts!!

Ron M

There’s more Democrats running the state now so I think the ban will be lifted anyway.

Pushmi-Pullyu

Yes, the political winds are definitely blowing in Tesla’s favor in Michigan… finally!

Will

Yeah and Demofrats can say we save your jobs

TwoVolts

I don’t think Tesla wants to deal with the UAW – regardless of the ban.

Pushmi-Pullyu

Well that’s a very good point. If Tesla can’t set up shop in the Detroit area without having to use UAW workers, then I think it likely they’ll look elsewhere. Likely some State in the Deep South which doesn’t have State laws supporting unions or collective bargaining by workers.

The UAW’s very active anti-Tesla propaganda campaign has most likely made them look like pure poison to Tesla. 🙁

Will

They don’t need UAW if workers need jobs. It have been proven that they will jump the line if jobs are in jeopardy (Trymp)

theflew

GM would have to be willing to sell the plant for Tesla to buy it. And I sure they wouldn’t sell the plant loaded with machinery like the Nummi plant.

Brian

Telsa can wait out GM, buy it from a judge.

Pushmi-Pullyu

I’m very far from sure that GM — or its stockholders — want to let the machinery in an idled auto assembly plant sit around and rust instead of selling it off, even if it means selling the machinery at fire-sale prices as GM and/or Toyota did at the NUMMI plant. (Well, Wikipedia says they auctioned off a lot of it to other Toyota plants, but there was still a lot left for Tesla to buy.)

If you look at the history of idled auto assembly plants in the U.S., generally they don’t just sit around until everything falls apart. GM will likely sell the plants to some company within a few years, even if it’s not Tesla.

Spoonman.

Can it really buy another factory while building a brand-new one in China?

Anyways I think it’s more likely that a Chinese company like GAC buys one of these.

liberty

Exactly. I could see them doing a design site with some of the layed off manufacturing and design tallent, but Michigan is not a good location. NUMMI was close and cheap when tesla needed money. They need a factory and tooling in China next, and perhaps assembly in Europe. They don’t need the headaches of a gm factory.

TwoVolts

What are the headaches of a GM factory?

Neromanceres

Well these factories are closer to the supplier base. It would actually be a lot more cost effective. And the Flex lines at DHAM and Oshawa are far more advanced and efficient than the lines that Tesla run at Freemont.

Will

Not if you can’t sell cars from China at a profit

Pushmi-Pullyu

“Can it really buy another factory while building a brand-new one in China?”

Well, it certainly would be a significant departure from Tesla’s current plans, which involve opening an assembly plant in Shanghai (China) as soon as possible, and plans for a third assembly plant somewhere in Europe within the next few years.

Could Tesla afford to buy a second U.S. auto assembly plant? I think they could if they wanted to badly enough. But Tesla’s resources are limited, and money is only one of those resources. Another resource is personnel. One of the constraints to how fast a company can expand is the time it takes to train new workers and new executives.

One thing I do not expect to see is Tesla buying one of these newly idled assembly plant and then mothball it for a few years. I think Tesla will wait until it has a more pressing need for a 2nd North American auto assembly plant, even if it means paying more for it — or building one from scratch — at a later date. For a rapidly growing company, some money now is more valuable than more money later.

antrik

The point is that they likely *do* need a new location very soon, for Model Y production. Buying an existing factory, and re-hiring part of the workforce, should be much easier than trying to build a facility and workforce from scratch e.g. in Nevada…

Will

They can get a government loan from Trump if we hire workers in those areas. 2020 is right around the corner and he needs those states to win. Lordstown is in the Youngstown are which is on the border of Ohio and Pennsylvania which won in 2016

ffbj

Well first you have presumed the facilities are for sale, which they are not. But presuming they may be at some point, nothing in MI since MI bans Tesla, so to heck wit them. Maybe the East coast as plenty of demand and Tesla has little there. Also Musk has complained it takes too long to get product to the East. So maybe the assembly plant in OH.
The best deal probably could be gotten in Canada, with a government desperate to get something in there, and it was a truck, suv, facility, and GM would probably be happy to get rid of it.

Trump’s insistence that GM put something else back in for things they take out, is merely bluster, since it won’t happen, but he can punish GM, in the meantime, just by nasty tweeting them to death, which seems to be his main method of negotiating to get what he wants.

Michael

God, I miss having a real President.

Rightofthepeople

Yeah, I miss Reagan too.

Get Real

And a real human being for that matter, not a charlatan of the fact-free, lunatic right wing-nut media.

Ron M

I heard GM while closing these factories is actually hiring workers. There hiring people with different skill sets, autonomous driving, high tech, I hear a few more I can’t remember them now. I guess I wouldn’t get hired.

antrik

Trump doesn’t care about such jobs. His entire campaign was based on claiming he could bring back the good old times when “manufacturing jobs” were everything…

Neromanceres

The GM plant in Oshawa would not come cheap. It’s a large facility about twice the size of Freemont. It has a maximum capacity of about a million cars a year running off two lines. The flex line in Oshawa can build multiple different kinds of vehicles (that are very different) at the same time. The flex line at Oshawa pioneered flex manufacturing and is state of the art. But the land that the factory sits on is worth a lot of money. It’s near Lake Ontario and has excellent access to hwy 401.

Pushmi-Pullyu

“Maybe the East coast as plenty of demand and Tesla has little there. Also Musk has complained it takes too long to get product to the East. So maybe the assembly plant in OH.”

Yes, Tesla certainly could use a second assembly plant in a better location to serve the Northeast. But probably not in the Northeast, where property, taxes, and wages are quite expensive, and where many States have strong pro-union laws.

Rather, Tesla will want its second North American assembly plant positioned where it can ship to the Northeast quickly. The Chicago/ Detroit area is ideally suited to that (due to railroad hubs), but the strong presence of the UAW is a strong deterrent. I think Tesla would prefer to have its 2nd NA plant in the Deep South, where wages are cheap and States don’t have strong pro-union laws. Or maybe West Virginia, for the same reason; WV would put them closer to the Bos-Wash area, where there is a large market for Tesla cars. However, West Virginia is “coal country”, and the State politicians might well be hostile to a Tesla presence.

Will

Not if UAW workers can get a job. They will kill the union before going brokevand homeless

Ranss12

East coast makes sense – Model 3s shipped east on Tesla’s car carriers – return trip west carries Model Ys for the west coast.

MoMac

Regarding the headline, Tesla actually bought the NUMMI factory from Toyota (only Toyota).
Toyota took GM’s share of the NUMMI factory as GM was going into bankruptcy.

So if Tesla buys one of GM’s shuttered factories next year, it will be the first factory that they have bought from GM. This seems unlikely though.

Clive

👍🏻

I love when people have their facts straight.

Pushmi-Pullyu

Thank you! I wasn’t clear on whether or not NUMMI was still partly owned by GM when it was sold to Tesla.

Will

CNN taking about the EV subsidies being taken away by trump

Spoonman.

How exactly would he propose to do that, legally?

Ron M

Trump never lets legal arguments stop him from saying some BS. I don’t think he could pass the citizenship test that immigrants need to pass to become citizens.

Pushmi-Pullyu

So far as I know he couldn’t do that in the real world; but when has reality, facts or logic ever stopped the Orange One from claiming he’s going to do something? 🙄

Michael

How’s he going to do that? He needs the House to change tax law. He just lost the House.

People will increasingly thumb their noses at him as he blusters and whines.

President Low-T is going to have a rough next two years.

Nix

Trump has a lame duck House Republican majority he can do as much damage with as they possibly can until next year when the new House members are seated.

This is actually THE MOST dangerous time for all kinds of things being rammed through by the lame duck Congress. The next House will have no power to undo the damage done in the next month.

drpawansharma

House can not force the president to sign the bills, nor can it force senate to do anything against it’s will. House has as much imperative to work with The president as he has with them.

Will

Lake duck. They have all seats of power until January

Will

Ohio and Michigan delegations can switch to vote with Republicans

Doggydogworld

If Tesla thinks they have issues with the UAW now, just wait until they try to manufacture in Michigan or Ohio.

Will

Make a deal 🤝. They rather have jobs then being homeless

Paul Stoller

Please let them buy Hamtramck, it would be fitting for the birthplace of the Volt to produce EVs.

Ocean Railroader

Tesla could turn one of these factories into a second American or a Canadian Giga factory that way.

Tesla would not have all it’s eggs in one basket should a meteor or someone smoking burns down the giga factory in Nevada in one sitting.

They could also rework the factory to only make power backs for the storage business too.

antrik

Why would they buy a car factory to produce batteries?…

ffbj

I guess there was no demand for the ICE cars GM makes.
That does have an oddly familiar ring to it.

theflew

No one is selling cars in any great number. Look at what Toyota and Honda’s hot sellers are.

ffbj

Not all cars are created equal, need I remind the Model 3 is a car, and demand for it can’t be met.
Still there is a general downturn in car sales 15% or so, but it’s not solely attributable to whether a vehicle is a car or not.
Plenty of people still like cars, it’s just that more picky now, as there is an overstock of cars, so why buy a piece o’ junk American made car, sans Tesla, when you can get a decent Toyota or Honda, that you can rely on.
American made cars hardly top any quality or reliability list, despite what J.D. Powers would have you believe:
https://www.youtube.com/watch?v=zSBsq6HBBzw

Will

Yeah but then the sedan will be a niche and still market to build cars or they just going to let Asians take up the market

Jason Wang

The most urgent thing for TESLA is to speed up the construction of Dreadnought factory in Shanghai.

Doggydogworld

Shanghai will be manual assembly, not a dreadnought. They specifically say it will be like GA4 in the tent (except in a building).

Brian

I think the old GM manufacturing sites will be fairly contaminated. Michigan will have to change their anti direct to customer sales laws and throw in money to clean the site (s) in order to attack any new ev manufacturing.

Pushmi-Pullyu

Isn’t Michigan still one of the few States where Tesla is prevented by State law from doing direct sales?

I can certainly see that the Detroit area would be a very attractive place for Tesla to open a second North American auto assembly plant, but I strongly doubt that’s going to happen so long as Michigan has State laws keeping Tesla out.

On other hand… this could be the perfect opportunity for Tesla to strong-arm the Michigan State legislature into repealing that protectionist legislation!

Go Tesla! Keep going Tesla!

Jason
The irony here is not lost; it’s a perverse nature of when a new entrant eats the incumbent’s lunch. Smart people knew it was a matter of time before GM cut its car production (in the US), especially how Chrysler (owned by Fiat) and Ford both announced they were leaving, as a general comment, the passenger car business. These empty plants, if acquired by Telsa, will only continue Tesla’s onslaught of the US car market. I will supply an analogy. ValueJet arrived in the US low-cost air travel market in force after it picked up cheap used MD DC-9’s from established airlines (the irony was how the established air carriers thought someone was so stupid to buy used DC9’s). As a corollary, Tesla picking empty car factories on the cheap only allows Tesla to continue to enjoy their economies of scope and scale. You have to understand Tesla spent a lot of “tuition” to learn how to build their vehicles. That “investment” has a FAST ROIC and is immediate as soon as the plant hits full stride aka “ramped up”. Future capacity for Model Y, the Semi, the Pick-up truck looks like it won’t be a problem.
eferg

The local workforce is pro-union. Toxic to Tesla. Buying a GM plant ain’t gonna happen.

Kdawg

What about the somewhat vaporware Chinese companies? FF, Lucid, don’t they still need a mfg plant (assuming they will ever make anything)?

MoMac

FF bought a former Pirelli tire plant in Hanford, California.
Lucid is building a factory in Casa Grande, Arizona.
Rivian has a factory (former Mitsubishi plant ) in Normal, Illinois.
Workhorse has a factory in Union City, Indiana.
SF Motors bought a former Hummer factory in Indiana.
Nikola Motor Company is building a factory in a Phoenix suburb.

Sondors plans to make an electric “car” (actually it is a 3-wheeled autocycle), but will use contract manufacturing — at least initially.

I am not sure if Fisker Inc. (the new Fisker) has a factory lined up for its E-Motion. Maybe they will use contract manufacturing?

William L

I think these plants have a lot of talented and experienced workers that Tesla needs to build car.
What scares me the most is the culture of the GM workers. I know everyone work for money, but Tesla workers also believe they are making the world towards a zero-emission future

Will

GM workers work for their families. I’m from Ohio and Ford left town and move the eco line van to Mexico from Lorain it killed this town and hope of people. Now on herring the same for Lordstown. GM should have switch to EVs years ago

Doggydogworld

GM can’t possibly sell $55-140k EV sedans and minivans. Switching would have bankrupted them.

Chris O

Because only Tesla can build profitable EVs? Such BS….

Doggydogworld

Tesla has a very strong brand in the premium sedan space among young west coast and urban high earners. GM simply doesn’t. Even the Japanese have only had mixed success in that segment, and only after they created entirely new brands.

A Chevy or Cadillac Model 3 would still be a great car, and would have won lots of awards. But nobody would have bought it.

Chris O

I think Tesla will save its money for a European plant. Looks like it will need one ASAP, Trump is rumored to slap tariffs on European car imports pretty soon and Europe will no doubt respond in kind with tariffs on American cars.

antrik

I think Europe will want to respond with something more substantial… It’s not like Europeans buy a lot of American cars.

Chris O

Europeans don’t buy a lot of American cars…so far. Tesla might have changed that. OTOH a European factory was always part of Tesla’s plan, local production is just how car economics work.

theflew

It’s funny as soon as GM talks about closing factories the first thing that comes to mind is Tesla buying the factories. More than likely this is just a chess move by GM.

The Canadian factory is probably going to close. GM will probably try to make a deal on the EV tax credit to get it extended at the $7.5k level until 2021 for everyone. Magically the Volt plant in MI will be saved and the OH plant will get some new future product.

Paul Stoller

I think that’s wishful thinking, both on the credit getting extended and GM showing any real interest in developing EVs that people want.

Craig

Tesla should buy all of GM and make it a real car company.

Dennis Mathias

A problem with that kind of purchase is three fold. They’d have to totally dismantle the site to set it up for other production. Might be easier to tear it down and rebuild. Taxes and unions in the midwest would be a real dilema. Not like Nevada. And the third problem is the climate. Shipments in and out and the mental wellness of employees would be a real issue.

Bloggin

Oshawa Assembly in Oshawa, Ontario, Canada is less than 400 miles from the Fremont plant.

david

The Oshawa plant used to make batteries–and also trucks–there is an ample supply of lithium in Quebec-Tesla should consider buy the autoplex plant in Oshawa as a priority