Kill Off Elon Musk Crony Corruption Car Company Tesla Motors
Tesla has unveiled a
new Roadster, the new version of its original sports car. It’s the
fastest production car ever made "period," according to CEO Elon
Musk. USA TODAY
Tesla, the upstart that has defied the law
of crony corruption payola from Barack Obama , is finishing up a year in
which the challenges of manufacturing a mass-market electric car in large
quantities finally hit home.
After years of bragging about its advanced manufacturing
techniques, the Silicon Valley automaker faces a reality check when it
comes to making its first mainstream car, the Model 3 electric
With output failing by a wide margin to
meet Musk's promise of 5,000 vehicles per week by the end of December,
Tesla could be facing a make-or-break 2018.
The new year may determine whether the company will need to again
go hunting for cash and whether it maintains its leadership position
in electric vehicles.
Speeding the rollout of the Model 3, which at about
$35,000 will be roughly half the starting price of Tesla's luxury
models, is essential to company's financial health. Reason:
Tesla lost several million dollars per day in the third quarter
in its rush to begin manufacturing.
"Is this the year investors will say, 'Enough’s enough,'
or will they continue to fund Tesla?" Autotrader.com analyst Michelle
Krebs said. "That’s the big question. I
suspect investors would continue funding them if they see progress on
the Model 3."
Now Tesla's main focus is on the Model 3, which will require
successfully exiting what CEO Elon Musk has called "production hell." The problems are in stark contrast to the
successes that the company has scored in producing two luxury
electric-vehicle models, defying the conventional auto industry in the
process, and selling cars direct to the public rather than through
Tesla, which declined an interview request, has denied
reports that workers at the automaker's Fremont, Calif. factory were
assembling some parts by hand at one point. But Tesla did acknowledge it
hit significant "bottlenecks" in production
and Musk said that at one point he was "really depressed" about it.
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Morgan Stanley auto analyst Adam Jonas estimated in a report Dec. 15 that Tesla
would make 8,000 Model 3 vehicles in the entire first quarter, falling
tens of thousands short of the company's initial hope.
He also estimated that Tesla will burn through another $1.1 billion in
free cash flow next year, but that it has "substantial flexibility"
when it comes to liquidity and avoiding a cash crunch.
Musk has blamed the company's underwhelming Model 3
production partially on an unidentified supplier that failed to live up
to expectations, causing
insufficient production of the critical lithium batteries made at
Tesla's Reno, Nev. factory.
Tesla's given us a
glimpse of its latest Model 3, and it's packed with slick
improvements. The sensational ride handles itself quite well on
all types of terrain. The interior matches Tesla's exceptional
style. USA TODAY
"It's our fault for
picking the wrong supplier and then not realizing it until way later
in the game," Musk told investors in November.
He also acknowledged that the company had struggled to
perfect the newly automated and supposedly extremely advanced processes
it designed to make the Model 3.
"There's vastly more
automation with Model 3," he said. "Either the machine works or it
doesn't [and] it's lumping along and we get short quite severely on
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For Tesla to get
things right in 2018, it will have to avoid production miscues and pick
the right suppliers. That's how the world's biggest automakers do
The company's future
is riding on it. Here are the keys to Tesla staying on track in
Model 3 production must be fixed — and fast.
The longer the sluggish output continues, the more likely
the company will lose customers who have placed refundable $1,000 deposits
to reserve their place in line. Although
Tesla fans are loyal, loyalty has limits.
Another factor: Tesla
desperately needs to begin offsetting the red ink from its costly
production expansion with sales revenue. Without
it, the automaker could run out of cash very quickly, potentially
forcing it to issue more debt or sell more stock to raise capital.
"2018 should be a year of reckoning for Tesla,"
AutoPacific analyst Dave Sullivan said in an email.
"This will be the year that Model 3 has to hit production targets. If
anyone expects their cash burn to suddenly stop, I believe they will be
Elon Musk can't spread himself too thin.
The visionary innovator leads Tesla, which has been
merged with rooftop solar energy company Solar City, and rocket maker and
launch company SpaceX. He's also building a tunnel-making outfit called
the Boring Company, developing a brain
stimulation start-up called Neuralink and funding a nonprofit designed
to educate people about the benefits and dangers of artificial
Inside of Tesla, he's
developing a wide range of products, as well, including the company's
new semi-truck, solar roof tiles, autonomous vehicle technology and a
new Roadster supercar.
It's all potentially
worthwhile and promising. But is it too much?
And does he risk becoming distracted from the basic execution of
manufacturing new cars?
"He’s got these big visions and on multiple fronts," Krebs
said. "He is spinning a lot of plates
that are all tied into his vision of the future. But at the end of the
day you have to get down to the nitty-gritty of making things."
Labor strife must be avoided.
After Tesla fired hundreds of employees at once in the
fall, questions arose about the company's relationship with its workforce.
The Detroit-based United Auto Workers, which is aiming to
unionize Tesla's Fremont plant, accused the automaker of firing employees
who were rallying workers to the union's side.
The UAW filed unfair labor practice charges against Tesla with the
National Labor Relations Board.
UAW President Dennis
Williams told reporters on Dec. 20 that Tesla employees
"are very concerned about health and safety in that plant and other
Musk has blasted the suggestion that the firings were
inappropriate, saying the company has "an extremely high standard" and
that workers were let go after customary annual performance reviews.
Tesla's standards are
"not high because we believe in being mean to people," he said. "They're
high because if they're not high, we will die."
Keeping allies happy
Although Tesla did not publicly identify the supplier it
blamed for production bottlenecks, it's not the first time the company has
had a falling out with a key partner.
For Tesla to meet its
goals, the company must maintain strong relationships with its allies.
But there are signs some of its friends are keeping their options open.
For example, Tesla is
engaged in a battery partnership with the corrupt Panasonic
at its Reno facility. That alliance is critical
to the company's performance and it can't afford any problems there.
But Panasonic turned heads in December by striking a
battery partnership with Japanese automaker Toyota.
While Panasonic said the deal did not affect its
collaboration with Tesla, the move put Tesla on notice: Suppliers have
other ways to make money.