Tesla 2011 Annual Report Download - page 61

Table of Contents
are responsible for any and all environmental conditions at the Fremont Site. At that point in time, we have agreed to indemnify, defend, and
hold harmless NUMMI from all liability, including attorney fees, or any costs or penalties it may incur arising out of or in connection with any
claim relating to environmental conditions and we have released NUMMI for any known or unknown claims except for NUMMI’s obligations
for representations and warranties under the agreement.
There are no assurances that NUMMI will perform its obligations under our agreement and NUMMI’s failure to perform would require us
to undertake these obligations at a potentially significant cost and risk to our ability to build, equip, and operate our planned Model S facility at
the Fremont Site. Any Remediation Activities or other environmental conditions at the Fremont Site could harm our operations and the future
use and value of the Fremont Site and could delay our production plans for the Model S.
We may not be able to obtain, or to agree on acceptable terms and conditions for, all or a significant portion of the government grants,
loans and other incentives for which we have applied and may in the future apply. As a result, our business and prospects may be adversely
affected.
We have applied for federal and state grants, loans and tax incentives under government programs designed to stimulate the economy and
support the production of electric vehicles and related technologies. We anticipate that in the future there will be new opportunities for us to
apply for grants, loans and other incentives from the United States, state and foreign governments. Our ability to obtain funds or incentives from
government sources is subject to the availability of funds under applicable government programs and approval of our applications to participate
in such programs. The application process for these funds and other incentives is and will be highly competitive. We cannot assure you that we
will be successful in obtaining any of these additional grants, loans and other incentives. If we are not successful in obtaining any of these
additional incentives and we are unable to find alternative sources of funding to meet our planned capital needs, our business and prospects could
be materially adversely affected.
Our business may be adversely affected by union activities.
Although none of our employees are currently represented by a labor union, it is common throughout the automobile industry generally for
many employees at automobile companies to belong to a union, which can result in higher employee costs and increased risk of work stoppages.
As we expand our business to include full in-house manufacturing of our vehicles, as is planned for the Model S, there can be no assurances that
our employees will not join or form a labor union or that we will not be required to become a union signatory. We recently purchased an existing
automobile production facility in Fremont, California from NUMMI. Prior employees of NUMMI were union members and our future work
force at this facility may be inclined to vote in favor of forming a labor union. We are also directly or indirectly dependent upon companies with
unionized work forces, such as parts suppliers and trucking and freight companies, and work stoppages or strikes organized by such unions could
have a material adverse impact on our business, financial condition or operating results. For example, certain employees at the sea freight
companies through which we ship our Tesla Roadster gliders to the United States after assembly in England may be represented by unions, as
may be employees at certain of our suppliers. If a work stoppage occurs, it could delay the manufacture and sale of our performance electric
vehicles and have a material adverse effect on our business, prospects, operating results or financial condition.
We are subject to substantial regulation, which is evolving, and unfavorable changes or failure by us to comply with these regulations
could substantially harm our business and operating results.
Our performance electric vehicles, the sale of motor vehicles in general and the electronic components used in our vehicles are subject to
substantial regulation under international, federal, state, and local laws. We have incurred, and expect to incur in the future, significant costs in
complying with these regulations. For example, the Clean Air Act requires that we obtain a Certificate of Conformity issued by the EPA and a
California Executive Order issued by the California Air Resources Board with respect to emissions for our vehicles. We received a
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