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Tesla near deal to build cars in Downey

The City Council is expected to vote on an agreement that could clear the way for the electric vehicle maker to build a factory on the site of the former space shuttle plant.

November 25, 2009|By Ken Bensinger and Richard Verrier
  • One of the buildings on an 80-acre site in Downey where spacecraft parts were once made. The property could become home to a more earthly purpose: building Tesla electric cars. Downey Studios currently uses the site for film and television production.
One of the buildings on an 80-acre site in Downey where spacecraft parts… (Carlos Chavez / Los Angeles…)

Downey is hoping that for electric-car maker Tesla Motors Inc., the third time is a charm.

Mayor Mario Guerra said Tuesday that the city was close to cementing a deal that would have Tesla build a factory on the site of the former space shuttle plant, potentially bringing auto manufacturing back to Southern California for the first time in nearly two decades.

The plant would employ 1,200 to 1,500 workers, he said, and be on an 80-acre site currently used by Downey Studios for film and television production. Years before, it was used by Rockwell International, and later Boeing Co., to build spacecraft.

The Downey City Council was expected to vote as early as Tuesday night on a memorandum of understanding with Industrial Realty Group, which operates Downey Studios, to broker a lease deal to the automaker, Guerra said.

Tesla, which currently makes a $109,000 electric coupe, has been looking for a location to build its next vehicle, an all-electric sedan called the Model S, for several years.

In June, it was awarded $465 million in low-cost loans from the Energy Department to finance production of the Model S, which is slated to have a retail price of $57,400 and get up to 300 miles on a charge.

The company has said it would build its plant in Southern California, but Tesla spokesman Ricardo Reyes would not confirm whether it had chosen Downey.

"We've been in discussions with other cities" as well, Reyes said. Tesla also has reportedly looked at using an old Boeing Co. factory in Long Beach.

The automaker previously abandoned plans to open factories in San Jose and Albuquerque, leading industry experts to question whether the Downey deal was a sure thing.

"Tesla is a moving target," said George Peterson, president of auto industry consulting firm AutoPacific. "Until these things are absolutely a done deal, they really shouldn't be made public."

Industrial Realty Group declined to comment.

If the council approves the deal, it would provide a much-needed economic boost to Downey, which once was the region's center of high-tech manufacturing but has in recent years become a symbol of that industry's decline in California.

A deal would also open the door to creating the first auto plant in Southern California since 1992, when then-General Motors Corp. closed its Van Nuys plant.

"We are being very aggressive," said Guerra, who declined to reveal whether the city was offering tax incentives to the automaker. "We feel that Tesla and high-end manufacturing jobs like that don't come around every day."

In February 2007, Tesla said it would open a plant to build an electric sedan in Albuquerque, after New Mexico Gov. Bill Richardson promised tax credits and a promise to buy 100 vehicles.

A year and a half later, Tesla dropped those plans, instead announcing that it had tapped San Jose as the future home of the futuristic car and would sign a 40-year lease in exchange for 10 years of free rent and sizable tax benefits.

That deal fell through in January. In March, Tesla Chief Executive Elon Musk said the automaker was concentrating its search on Southern California. Musk also runs Space Exploration Technologies Corp., a rocket ship company based in Hawthorne.

Once teeming with 30,000 employees working on Apollo space capsules and the space shuttle, the Downey site fell into disrepair after Boeing left it in 1999.

But in 2003, Industrial Realty Group, known as IRG, acquired about 60 acres of the site, leasing an additional 20 acres from the city, and began refurbishing it into a sprawling film production studio.

Today, Downey Studios is one of the largest film production spaces in North America with more than 360,000 square feet of production space, a 20-acre backlot and an artificial lake that is the size of a football field.

Although the studio has hosted a number of high-profile films over the years, including "Terminator 3: Rise of the Machines" "The Italian Job" and "G.I. Joe: The Rise of Cobra," the business suffered from an overall slowdown in local feature production in Los Angeles and adverse publicity caused by a dispute with a union representing workers who alleged that they became sick when they worked on the site.

Dozens of film production workers have filed workers' compensation claims alleging that they developed serious respiratory and other problems while working there. IRG has maintained that the allegations are baseless and insurers have dismissed the claims, saying the illnesses stemmed from pre-existing conditions or previous employment.

To date, Tesla has delivered about 900 of its Roadsters, which are largely assembled in England. In August, the automaker said it would build a factory in Palo Alto, where it will build electric powertrains. Tesla said it would use part of its federal financing to pay for that deal.

ken.bensinger@latimes.com

richard.verrier@latimes.com

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