FREMONT, Calif. -- Gilbert Passin surveys the 50-year-old factory where Tesla Motors Inc. plans to make electric cars, and he sees a manufacturing bargain.
The former engineer for Toyota Motor Corp., Volvo AB's Mack truck unit and Renault SA designed the second-hand Fremont, Calif., plant.
He equipped it with Ikea furniture and refurbished machinery to build battery-powered cars to take on the likes of BMW's 5 Series, starting in about two months.
"The cost to set this up was very, very low compared to any new plant," said Passin, vice president of manufacturing for Palo Alto, Calif.-based Tesla. "Everything we are doing has a very good value return."
Holding down plant costs is crucial to the success of Tesla, led by Silicon Valley entrepreneur Elon Musk and which has yet to record its first profit, because regardless of how many consumers may want environmentally friendly cars, no rechargeable vehicle will be economically viable unless it can compete on price with conventional models.
With the going price to build a North American auto plant averaging $1 billion, Tesla may have spent less than a third that much to buy, renovate and equip its factory.
It paid $42 million for the plant in 2010, spent $17 million for some of its presses and machinery, and received other used equipment at a "fraction" of the original cost from parts suppliers including Tower Automotive Inc., said Passin, 51.
In February, when it released 2011 financial results, Tesla said its current business plan would provide enough "liquidity to reach profitability in 2013."
The factory in California's Bay Area is also something of a window into a half-century of U.S. auto manufacturing. It opened in 1962 and made Oldsmobiles, Buicks, Pontiacs and Chevrolets for the former General Motors Corp.
It closed in 1982, then reopened two years later as New United Motor Manufacturing Inc., or Nummi, a joint-venture shared by GM and Toyota.
GM's 2009 bankruptcy closed the factory again, until Musk announced plans to make it his production base in 2010.
Toyota and Daimler AG, maker of Mercedes-Benz cars and trucks, are investors in Tesla.
The factory currently employs about 600 people, including some former Nummi staff, and will have between 1,200 and 1,500 by year end, Passin said.
The activity in preparation for the start of production of Tesla's Model S presents a contrast to competitor Fisker Automotive Inc., which has halted work on the Delaware factory it bought from General Motors Co.'s predecessor after losing access to U.S. loans.
At Tesla, the start of Model S assembly is building confidence the company will survive and repay the $465 million made available by the Energy Department.
Tesla said it still had $189 million remaining on the federal loan in February.
That same month, Fisker said access to its $529 million loan was suspended last year after it failed to meet the timetable for bringing its Karma sedan to market.
The Anaheim, Calif.-based company has said it's in talks with the Energy Department to regain access to the funds and restart work on its plant.
Tesla's timing was fortunate, said Michael Robinet, managing director for industry consultant IHS Automotive, in Northville, Mich.
"Nummi had a relatively new paint shop, and that alone is a huge amount of cost for any factory," Robinet said.
Tesla's decision to design an assembly floor that can be quickly reconfigured as production patterns change is smart for the company's relatively low production volume, Robinet said.
"They really got the benefit of not having a pre-determined build process," he said. "It makes a lot of sense to have a very flexible space in their case. There are things you can do in a factory that's only going to build 20,000 vehicles a year that aren't possible in a 200,000-unit line."
Tesla is using only about 20 percent of the factory that once built as many as 500,000 cars and pickups annually for Toyota and GM.
That vast unused portion, walled off from the Model S assembly line, is referred to as the "Dark Side" by Passin's team, because it's illuminated only when someone walks under motion-activated lighting.
Fire-engine red assembly robots made by Kuka AG ring the factory's assembly floor, coated with a bright white epoxy that gives the old facility a modern look.
Large windows and skylights have been added to brighten the assembly space.