This isn’t first time GM (ticker: GM) sold (or plans to sell) a plant to a new electric-car company. Don’t forget,
(TSLA) Fremont, Calif., facility once upon a time churned out GM cars. The plant was sold for a bargain price just after the financial crisis.
GM filed for bankruptcy protection in June 2009. Shortly before that, the company reported a $30 billion loss for 2008; U.S. annualized car sales had dropped from a precrisis peak of about 16 million units all the way down to 9 million units and then-GM CEO Rick Wagoner was being chastised in front of lawmakers for flying a private jet to Congressional hearings asking for bailout money.
At about the same time, an upstart auto company, named for Serbian-American inventor Nikola Tesla, was producing its first all-electric roadster capable of going 0 to 60 miles an hour in 3.7 seconds. That was almost 10 years ago. The brand new electric hypercar by Pininfarina can do that in under 2 seconds, but that older vehicle, called the Battista, had cost $2 million.
In May 2010, Tesla secured an important deal that would set the company up to produce all of its Model S and 3 sedans as well as its Model X sport-utility vehicles long into the future. A month later, in June, Tesla had its initial public offering.
“We entered into an agreement to purchase an existing automobile production facility located in Fremont, Calif., from NUMMI,” reads Tesla’s old registration statement with the Securities and Exchange Commission. The total cash paid by Telsa was under $50 million for 210 acres of land and 5.4 million square feet of manufacturing space. Tooling and parts were purchased for another $17 million.
NUMMI was short for New United Motor Manufacturing, Inc., and was a joint venture between GM and
(TM). The plant made more than 400,000 cars a year at its peak, producing Corollas and Pontiacs, among other models.
The original cost of the plant isn’t precisely known. It operated for several decades and was likely modified several times, but the plant’s price tag when new was likely in the billions. That made the deal quite a coup for Tesla.
GM didn’t immediately respond to a request for comment when asked about the plant. GM closed and sold the facility, in part, because the Pontiac brand didn’t survive bankruptcy proceedings.
Workhorse (WKHS) wants to make electric-powered commercial trucks in the GM Lordstown facility. Workhorse is a development-stage company with almost no sales and a $150 million market value. About $100 million of the market value was created yesterday after the stock more than tripled on news of the GM deal.
It’s too early to know if Workhorse will be successful, but it’s always a good idea to get a full-scale manufacturing facility at a big discount.