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2016-12-06 10:12:15
DealBook: Want to Bring Back Jobs, Mr. President-Elect? Call Elon Musk

PALO ALTO, Calif. — Donald Trump: Please think about calling Elon Musk.

President-elect Trump has spent a lot of time talking about how he plans to reinvigorate the manufacturing sector, repeatedly telling the public on the campaign trail, “We are going to bring back jobs that have been stolen from you.”

And yet the group of business luminaries he named on Friday to advise him on “job creation” — which included Jamie Dimon of JPMorgan Chase, Robert Iger of Disney and Mary Barra of General Motors — was missing a key name: Mr. Musk, the real-life Tony Stark behind Tesla, the electric car company; SolarCity, the solar power provider; and SpaceX, the rocket company.

Mr. Musk, 45, is arguably the one person in the nation more responsible than anyone else for generating a vision for the re-emergence of manufacturing in the United States en masse. And he is revered among most of his peers here in Silicon Valley and elsewhere.

In the last decade, Mr. Musk has created nearly 35,000 jobs among his various enterprises — and most of those jobs are classic manufacturing ones. His Tesla Gigafactory, a 5.5-million-square-foot battery factory under construction outside Reno, Nev., is expected to employ 6,500 people in manufacturing jobs by 2020.

After the factory is complete, 95 percent of the parts contained in Tesla vehicles will be made in the United States. His company’s leading-edge advances have pushed the entire auto industry to innovate, with rivals seeking to copy many of Tesla’s best features.

This is the future of manufacturing — much more so than the 1,000 jobs saved at the Carrier plant in Indiana last week.

And Tesla’s challenges are a microcosm of the trade issues that confound so many American manufacturers: To sell its cars in China, Tesla faces tariffs and other disincentives that make its vehicles 40 percent more expensive than locally produced electric cars, according to Mr. Musk. If you flip it around, China faces only a nominal tax to sell electric cars and parts in the United States. The situation is fairly similar in much of Europe.

Still, conservative groups and individuals have taken to the internet with a litany of real and fake stories attacking Mr. Musk for the government subsidies Tesla receives, and for his vocal warnings on climate change.

Robert E. Murray, chief executive of Murray Energy Corporation, the largest privately owned coal company, called Mr. Musk “a fraud” for accepting $2 billion in government subsidies for Tesla.

Mr. Musk, fighting back on Twitter, wrote of Mr. Murray, a Republican who doesn’t believe human activity is affecting the climate: “Real fraud going on is denial of climate science. As for ‘subsidies’, Tesla gets pennies on dollar vs coal. How about we both go to zero?”

There is some evidence that the president-elect will be flexible on the issues Mr. Musk champions. On Monday, Mr. Trump met with former Vice President Al Gore, whose name is synonymous with the effort to fight global warming, and Mr. Gore told reporters that the session had been “lengthy and very productive.” And in an interview at The New York Times on Nov. 22, Mr. Trump said he would keep an open mind on the subject.

To Mr. Musk’s critics, he and the subsidies that have been offered to companies like his — mostly in the form of federal clean-energy tax credits and rebates — represent the “swamp” that Mr. Trump says he wants to “drain.”

Separately, Jim Chanos, the investor who has bet against the price of Tesla’s shares, called Mr. Musk’s merger of Tesla and SolarCity, both of which he controlled, a “shameful example of corporate governance at its worst.” Some analysts denounced Mr. Musk as a “corporate governmental mess” and others have called him a huckster.

Indeed, while Mr. Musk gets painted as a benefactor of crony capitalism and the Obama administration’s efforts to promote green energy, he is — perhaps counterintuitively — a prime example of everything we want our business leaders to be.

What other chief executive do you know who takes only $1 a year in salary and has never sold a share of Tesla except to pay taxes? Yes, he pays taxes — to the tune of some $600 million in just the past year. He has about as much skin in the game as any C.E.O. in the country. (If you’re asking how he pays to live, he has taken out a series of loans from Morgan Stanley and Goldman Sachs, using his shares as collateral. For some, that raises its own corporate governance concerns. However, the loans represent only about 5 percent of his net worth, so unless shares of Tesla fall precipitously, he should be able to cover the loan amounts.)

And when questions arose about whether Tesla would be able to pay off SolarCity’s debt after the two companies merged, Mr. Musk declared, “I would pay it personally if need be.” That’s putting your money where your mouth is.

As for the government subsidies offered to the electric car industry, Mr. Musk has made a compelling case that he would benefit more if the subsidies didn’t exist.

“Ironically, if all incentives and subsidies were removed for Tesla, Tesla’s competitive position would increase, not decrease,” he said recently at a shareholder meeting. “We do believe there should be government incentives for electric vehicles, but we believe they should be there for the good of the industry and to accelerate the advent of sustainable transport — not because Tesla needs them.”

The incentives, he went on, “don’t scale or are disadvantageous.” The credits are worth less to Tesla than to a traditional carmaker that also sells conventional vehicles, Mr. Musk said, adding that the credits are reduced after production of 200,000 electric vehicles, so they are “essentially irrelevant for any high-volume program.”

Tesla’s current customers — many of whom have paid more than $100,000 for their snappy electric roadsters — are probably unaffected by the $7,500 subsidy. And by the time Tesla is selling vehicles for $35,000, as it plans to, the rebate will be cut in half because the company will be producing too many cars to qualify.

“Let’s say the new president erased all incentives,” Mr. Musk said, “Tesla’s competitive position would be better.”

All that may be hard to square in the short term: Tesla turned a $22 million profit last quarter, in part after selling $139 million from zero-emission vehicle credits to other car manufacturers. But it is undoubtedly true in the long term.

Whether Mr. Musk’s various businesses will succeed, of course, remains an open question. But it is his kind of businesses — which offer the chance to restore real manufacturing jobs in America, and which integrate meaningful technological innovation — that we should all be encouraging.

On Monday, I sent an email to Mr. Musk in hopes that writing this column wouldn’t be for naught. After all, when I had spoken to him at a Vanity Fair conference in 2015 about the election, he told me he was not a supporter of Mr. Trump’s candidacy.

In a note back to me on Monday, Mr. Musk said he was heartened by Mr. Trump’s recent acknowledgment that human-driven global warming may be real.

Would he want to engage with the president-elect?

“I’d be happy to talk to Trump,” Mr. Musk wrote.