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Startup Carbon Motors could create 1,500 jobs

April 13, 2009

CONNERSVILLE—Carbon Motors is shopping for a place to put down roots before it's raised enough money to begin production of its specialty police car.

In fact, Carbon Motors still is trying to raise enough money to build five cars for crash testing, said Raymond Wenig, president of Savannah, Ga.-based Ariel Savannah Angel Partners, one of the company's financial backers.

Wenig's investment group has plowed more than $400,000 into Carbon Motors, but he acknowledged it must clear several more hurdles before its E7 police car becomes a reality.

One will be the safety-approval process.

"Now you've got another risk factor," Wenig said.

The numerous obstacles haven't dampened the enthusiasm of Connersville residents and political leaders, who learned recently that their city is one of seven communities under consideration for Carbon's first corporate campus. Local officials hope the vacant Visteon plant will give them an edge over other finalists.

The company could create 1,500 jobs with a headquarters and assembly plant.

"If that moves in, maybe Connersville has a chance," said Ann Frye, who lost her job at Valeo's radiator factory in Greensburg a year ago.

But landing the operation—and launching production—is far from a sure thing.

Carbon Motors, temporarily based in Atlanta, hopes to begin producing cars sometime in 2012. However, according to Wenig, it needs to raise $100 million for that stage.

Other cities in the running are Plymouth, Mich.; Braselton and Pooler, Ga.; Charlotte, N.C.; and Greenville and Spartanburg, S.C. Carbon Motors might make its decision as early as this summer.

"We're incredibly excited to see the proposal they're putting forward," said Stacy Dean Stephens, a co-founder of Carbon.

"Connersville has been incredibly proactive in everything they're doing. The governor, all the way down to the mayor ... . Everybody has been involved in this process."

The company would move to its new location soon after making a decision, Stephens said. The Atlanta operation consists of eight people, including the co-founders and some contractors. The team would begin in a new location with 200 employees.

Carbon Motors is the brainchild of former Ford executive William Santana Li. If produced, the E7 would compete with Ford's own Crown Victoria, the most widely used police car.

The E7 appeals to cops with high-tech gadgetry and a design that caters to their driving habits, which include hitting curbs at 55 mph and crossing medians, said Stephens, a former police officer. Meanwhile, the company hopes budget-minded police administrators will like the fuel-efficient diesel engine.

While Carbon Motors has announced some of its suppliers, including BASF and Hydro Aluminum, its engine and powertrain maker remains a secret. The company also has not released its initial price, or an estimated cost of ownership. It does claim the E7 would save departments $8 million over the life of a 100-car fleet. Stephens said the E7 eliminates the need to buy cars, then spend more money outfitting them with police equipment. "Everything about us is completely, 180 degrees, opposite an automaker," he said.

Stephens acknowledged that cash-strapped police agencies might delay replacing cars, but he said that doesn't have a "material" impact on sales projections. The company is not releasing those figures. Wenig said Ariel was attracted to Carbon Motors' business model. "It's going to be a Harvard Business [School] case," he predicted. About 75,000 patrol cars are sold each year, but Carbon Motors needs to capture only a small fraction of that market to survive, Wenig said.

Carbon Motors has been taking its drivable prototype around the country, and so far, cops are enthusiastic. The company has tentative orders for 9,000 cars, Wenig said.

Wenig likes that Carbon Motors plans to keep control of every car it sells. There will be no police auctions for the E7. Each one will either be refurbished or destroyed.

"Once they're into the Carbon, they're in it for a long time," he said.

Wenig said his group helped the company raise its first $5 million and wants to participate in a second round of funding. The additional $5 million would float Carbon Motors until it reaches production stage.

At the same time, the company has hired the Chicago investment bank William Blair & Co., which will help raise $100 million to actually launch production, Wenig said. A bank representative did not respond to a request for comment.

Li and his co-founders started Carbon Motors in 2003 and moved to Atlanta two years later. The company has worked closely with Georgia Tech, and received money from the Advanced Technology Development Center, an Atlanta business incubator.

Investors will look favorably on the tax breaks Carbon Motors reaps at its chosen location. Connersville Mayor Leonard Urban would not discuss the details of the city's offer, but the major incentives are likely to come from the Indiana Economic Development Corp.

"It's called non-dilutive capital," Wenig said. "We like that."

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