US Choice: Put Money in Startups or Big Three

Small upstart Tesla wants to build on the success of its bold electric sports car—the pricey Roadster—by building a tamer sedan for the masses. But to do so, it needs a big infusion of cash from the Obama administration, which is looking to boost clean energy. The situation, notes Devid Welch in BusinessWeek, poses a tricky question for Obama: Are taxpayer dollars best spent on “small startups or big but troubled players inlcuding General Motors and Ford?"

Tesla says it needs $450 million from the Energy Department to put its $50,000 sedan on the road by 2011. To qualify, it must raise millions in matching funds and prove the car is viable. With the Chevy Volt hot on its heels, policymakers will have to decide whether Tesla can survive in a cutthroat market. "Big parts makers typically won't even look at a car that doesn't sell in the tens of thousands," says Welch. So even if Tesla gets aid, the rest of the industry may be leery.