Carbon Motors Corp.?s $350M police chase
March. 29, 2009
An Atlanta auto startup is shifting into high gear to raise an ambitious $350 million, even as the auto industry sputters to a standstill.
Carbon Motors Corp. is shopping sites in five states to put its 300-acre corporate campus, where it hopes to employ about 1,500 and produce the Carbon E7 ? a police cruiser the company claims is faster and more fuel- efficient than today?s cop car.
The startup is eyeing sites in Pooler, Ga. (near Savannah), and northeast of Atlanta in Braselton, in addition to sites in Michigan, Indiana and the Carolinas.
William Santana Li, Carbon Motors? CEO and a former Ford Motor Co. executive, declined to comment on any fundraising activity.
Carbon Motors hopes to start production in 2012, but first it must line up financing ? a monumental challenge in the middle of a recession that has paralyzed the capital markets and spooked investors.
Credit conditions haven?t been this tight in 70 years, said Sean McAlinden, chief economist at the Center of Automotive Research in Ann Arbor, Mich.
Opening a lemonade stand in this environment would be challenging if it required a business loan, McAlinden quipped.
Carbon Motors will have to ?put a lot of money in the ground? to get started, said Glenn Mercer, a Cleveland-based auto industry analyst.
?Anybody who has really tried to start up a new car company ... has run into the immense fixed costs of doing so,? Mercer said. ?History is littered with failed automotive startups.?
Unmet need
While Carbon Motors? capital-raising outlook might seem murky, the potential market for the clean diesel-fueled E7 is clearer.
Of the roughly 450,000 law enforcement vehicles on the road, about 75,000 are replaced with new vehicles annually. Today?s police cars are souped-up versions of passenger cars ? mostly Crown Victorias.
Carbon Motors could be in the demand sweet spot, McAlinden said, because Ford plans to phase out production of the Crown Victoria over the next few years.
The broad-shouldered E7 can burn biodiesel and offers options such as an automatic license plate recognition system, a reverse backup camera and even integrated shotgun mounts.
With 300 horses under the hood, the E7 has a top speed of 155 mph, zips from zero to 60 mph in 6.5 seconds and is 40 percent more fuel-efficient.
While Li declined to price the E7, published reports have pegged it at about $50,000.
?Police operate with a budget that includes more than just the cost of the vehicle ? it?s a life-cycle budget,? McAlinden said. ?At the end of the day, they are going to look at, ?Well, what?s it cost to run these cars for five to six years?? ?
That?s where the E7 could emerge as a more cost-effective investment.
The E7 promises lower service costs ? it can go more than 10,000 miles without an oil change and is designed to run for up to 250,000 miles.
A police force with a 120-car fleet of E7s, Li said, could potentially save up to $8 million over a decade.
Law enforcement agencies, however, can be challenging customers because they have varying budgets and expectations, McAlinden said.
?You might end up [with] 20 [to] 25 different kinds of police car sets of requirements across the 50 states,? he said. ?It?s been a nightmare for Ford, even as a monopolist, almost, in recent years.?
Not General Motors Corp.
Carbon Motors is a homeland security outfit, rather than a retail automotive company, said Sonny Seals, a Carbon Motors investor and managing director of executive search firm Eton Partners.
?It?s more like Lockheed Martin than it is Ford Motor,? Seals said.
Unlike traditional auto companies that rely on a complex and expensive dealer network, Carbon Motors will sell directly to law enforcement agencies.
The company, which expects to break even by the end of the first year of production, has reservations for about 10,000 vehicles, Li said.
A high-tech production and design process, the company claimed, will churn out cars at a fraction of the cost of the Detroit Three, allowing it to sustain itself on lighter volumes.
Carbon Motors will source about a third of the vehicle?s parts from Europe and Asia and will do final assembly on its campus. The plant will be built to accommodate a flexible production schedule.
?We can add capacity in 10,000-unit increments as needed,? Li said. ?We don?t install 50,000 units of capacity? and hope to sell to that volume.
Production will also be synced to demand.
?We?ll know a year, or two years, well in advance how many [vehicles] we?re going to sell ? to what ZIP code and what configuration and quantity,? Li said
In its search for the ideal site to locate its operations, Carbon Motors is seeking proximity to a major metro area from which it can draw engineering and white-collar talent.
The company, which expects to pick a site by summer, wants to be located near a cluster of auto parts suppliers and have easy access to a major airport and interstates.
?We?re not a company that?s just running around trying to find the highest [economic incentives],? Li said. ?Our first thing is to find the best strategic and technical location.?
Site search
Braselton is on the short list because it is in the middle of the West Point, Ga., Chattanooga, Tenn., and Spartanburg, S.C., auto triangle.
In Pooler, Carbon Motors is eyeing a site that Daimler had considered for a truck plant. Located six miles from the Savannah port, the more than 1,000-acre site is at the intersection of interstates 95 and 16 and is accessible by rail.
Having access to a port would also fit in well with Carbon Motors? long-term strategy to sell in overseas markets.
The Pooler site, owned by the state, is equipped with road access and power infrastructure, said Rick Winger, president of the Savannah Economic Development Authority.
?It is a site that, for a company in a hurry, a lot has already been done,? Wagner said.
Carbon Motors would be an attractive catch for Pooler, Winger said, not just because of the number of jobs it would bring, but because the company?s product has a sustainable market.
?This is not a product that?s subject to stylistic changes,? he said. ?It?s a no-nonsense, do-business [vehicle].?
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