Howes: Tesla troubles mount for Musk, bullish investors
The light is flashing red again at Tesla Inc.
Just days after accidents involving its flagship Model S raised new questions about the safety of the electric car and its semi-autonomous Autopilot system, two more high-level executives are leaving their jobs. Added to earlier defections in finance and global sales, the continuing talent drain is likely to stoke concerns about the company’s ability to deliver on Chairman Elon Musk’s lofty promises.
It should, because churn like this is no marker of stability. The California automaker’s top technical contact with U.S. safety regulators, Matthew Schwall, is bolting for rival Waymo LLC, the self-driving unit of Google parent Alphabet Inc., the Wall Street Journal reported Monday. It cited a memo from Musk saying the company is “flattening the management structure to improve communication.”
And Tesla’s senior vice president of engineering, Doug Field, is taking a leave of absence amid the troubled launch of Tesla’s long-awaited Model 3, the mass-market compact EV investors expect to generate badly needed cash for a company rapidly burning through it. He’s the same guy who just seven weeks ago exhorted Fremont assembly line workers building the Model 3 to “prove a bunch of haters wrong.”
So far, they mostly haven’t. You can hear the sirens all the way from Detroit: from the outside looking in, Tesla is a company in turmoil. Its vaunted assembly line building the Model 3 proved too reliant on robots, forcing engineers to rethink the process mid-launch — the kind of costly mistake traditional automotive rivals simply would not make today.
In its last earnings call, Musk berated a few key analysts for asking “boring, bonehead questions,” a stunt that drove Tesla shares lower and fueled questions about the chairman’s judgment. In an April Fool’s Day tweet datelined Palo Alto, Musk wrote:
“Despite intense efforts to raise money, including a last-ditch mass sale of Easter Eggs, we are sad to report that Tesla has gone completely and totally bankrupt. So bankrupt, you can’t believe it.”
Funny? Investors didn’t think so — and they’d be right. Erratic impulsiveness is seldom a good trait in a CEO, especially one whose business rests not just on his innovative mind, but also investors’ dollars and the sale of zero-emissions credits offered by California and nine other states.
In the intervening six weeks, Tesla lost the head of its Autopilot system to Intel Corp., and the executive exodus continues. Tesla’s Model 3 launch lags projections for production, deliveries and cash-generation. And more reports of serious accidents raise fresh questions about the safety of its cars and an Autopilot self-driving system that is, in fact, not what its name implies.
“Every driver is responsible for remaining alert and active when using Autopilot,” Tesla says on its website, “and must be prepared to take action at any time.”
On Saturday, a Model S with the Autopilot feature engaged rear-ended a fire department truck in Utah at 60 mph, apparently without braking. The accident comes as federal investigators are continuing their probe of the Tesla system, which uses cameras and radar to regulate speed.
Last Tuesday, two Florida teenagers died after the Model S one of them was driving crashed into a concrete wall near a Fort Lauderdale beach. The car, powered by electric batteries, burst into flames — eerily reminiscent of the March crash of a Model X SUV in California that burned and claimed the driver.
None of this is good for Tesla or its flamboyant founder. And pointing it out isn’t “hating.” It’s reality, a confluence of inconvenient facts that offset the zero-emissions, tech-driven vision embraced by (some) investors and would-be customers perfectly content to park their $1,000 Model 3 deposits with Tesla for who knows how long.
Probably not indefinitely. Musk’s vow to “flatten” Tesla’s management structure smacks of a cost-cutting move that recognizes a) cash is precious and b) that the boss wants to avoid raising fresh capital this year, as many analysts insist he will, and c) that the whirring revolving door to Tesla’s executive suite is hardly a persuasive recruiting tool for wooing new talent.
Oh, the chance to be The Change that gets Tesla back on track to realizing Musk’s world view could prove irresistible for fresh talent. And it would be especially so for those who think they might be able to focus the boss on executing the plan instead of working the Twitter account.
Don’t count on it. Tesla shares lost another $9, or a little more than 3 percent, Monday on news of the executive defections and management restructuring. Over the past year, the automaker’s shares are down 25 percent — a favorite among short sellers betting Tesla shares will lose more value and they’ll make money on the trade.
Given the past couple of months, who can blame them?
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.