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Tesla buying GM’s factory could create jobs, help auto industry

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As old-guard automakers struggle to adapt to changing markets, factories are shuttering and jobs are being cut.

General Motors, the most recent example, announced earlier this month it would “de-allocate” three North American plants in Oshawa, Ontario, Canada; Detroit; and Warren, Ohio in 2019. The shifts away from producing passenger cars thanks to plummeting consumer demand for the vehicles will help GM remain profitable, CEO Mary Barra said — but will cost 14,000 employees their jobs.

That’s where Tesla comes in.

Already at 45,000 employees and expecting to remain profitable after its first cash flow positive quarter earlier this year, the company is gearing up to expand its production capacity — most notably in China, where its begun construction on a second Gigafactory.

There’s also room for expansion in the United States as well. Adam Jonas, an analyst for Morgan Stanley predicts that Tesla could reach 92,000 workers by 2030, with “tens of thousands of jobs” needed in the US more immediately.

So far, Tesla has avoided the traditional hearth of American auto production near Detroit and farther south in the Tennessee region, but as it looks for more skilled workers — and supportive politicians — locations outside of California may be on its short list.

“Hey Elon Musk, Call me,” Ohio Governor John Kasich tweeted this week. “There are no better works than Ohio workers. And Lordstown is ready for you.”

Morgan Stanley says Kasich’s pitch could be a win-win-win-win for everyone involved.

“Tesla, GM, President Trump, EV’s, and a small town in northeast Ohio are all potentially connected in an evolving narrative around the future of high tech manufacturing in the US,” it said in a note to clients this week. “We see many potential outcomes, including one that benefits Tesla, GM, the consumer and the next-gen American auto worker.”

It was Tesla CEO Elon Musk’s comments to CBS’ 60 Minutes that catalyzed the bank’s theorizing. He told the news magazine that Tesla “would be interested” in buying an idled GM plant.

And it wouldn’t be the company’s first time sapping up unused assets from a bigger player in the space for a hefty discount. It’s main Fremont, California assembly plant is a former New United Motor Manufacturing, Inc. factory (even if Tesla has struggled to produce cars as the same quip as the now-shuttered previous owner).

GM’s cars may not be selling well, but Tesla continues to sell more. Morgan Stanley projects sale of the Model 3 to grow by 114% in 2019.

A deal could be favorable for both Tesla and GM investors, too.

“Given the parties involved in this story,” writes Morgan Stanley, “We think there is a distinct possibility that the event path could evolve into something with greater significance for the stocks involved.”

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