Tesla pays off its $451 milllion federal loan

Chris Woodyard | USA TODAY

Electric car maker Tesla Motors, in a move that is sure to buoy both the company and the Obama administration, announced Wednesday that it has paid off its entire federal loan.

It is paying off $451.8 million of the remaining loan approved by the Energy Department in 2009 -- with interest.

The loan program has been a major controversy, with Republicans pointing to the failure of solar panel maker Solyndra and likely bankruptcy filing by plug-in hybrid car maker Fisker to make the case that the government embarked on risky "green energy" loans. Former Massachusetts Gov. Mitt Romney cited Tesla, along with Fisker, in bashing President Obama over the loans during the presidential campaign last year.

On his second day as the new Energy Department secretary, Earnest Moniz hailed Tesla's repayment as proof that the loan program is delivering results for taxpayers. So far, losses amount to about 2% of the $34 billion portfolio.

"Today, Tesla employs more than 3,000 American workers and is living proof of the power of American innovation," he says in a statement. "This is another important contribution to what the Obama Administration has done to preserve and promote America's auto industry."

Tesla's move had been anticipated since last week when it took advantage of a soaring stock price to issue more stock shares and make a bond offering. The stock price rose after the company reported that it had earned a profit in the first quarter, the first since its founding.

Tesla makes the all-electric Model S sedan, which has received critical acclaim -- including a 99 out of 100 score from Consumer Reports in its testing and Motor Trend Car of the Year -- but with a starting price of nearly $70,000, remains out of the price reach of most car buyers. Tesla is due to start production of an equally expensive gull-winged SUV, the Model X, later this year.

Tesla, in announcing the payback, said it is the first automaker to fully repay its loan.

"I would like to thank the Department of Energy and the members of Congress and their staffs that worked hard to create the (advanced vehicle loan) program, and particularly the American taxpayer from whom these funds originate," said Tesla Elon Musk in a statement. "I hope we did you proud."

Observers of the alternative energy car scene say Musk is being smart, both political and financially, with the repayment

"It's a great move," says Ron Cogan, publisher of the Green Car Journal. "It takes the political heat away and it will signifiy to consumers and investors that Tesla is financially healthy."

Besides, the federal loan has been "an anchor around Fisker's neck." Executives of Tesla "don't want to take any chances of that happening" to them.

The government lost $535 million in solar panel maker Solyndra and it's yet to be seen what happens to the $197 million loaned to Fisker, which stopped production after its battery supplier was sold after bankruptcy proceedings.