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October 15, 2008, 6:30 pm

Tesla’s wild ride continues

By Michael V. Copeland

Maybe Tesla chairman Elon Musk flipped through the “R.I.P. Good Times”  slide deck that Sequoia Capital showed its startup CEOs last week about the tough road ahead. Whether he did or didn’t, Musk pulled a few pages from it, as he announced Wednesday on the Tesla blog that not only would there be layoffs at the electric car  startup, he would be taking over as CEO from  Ze’ev Drori and delaying the company’s next vehicle.

Drori, in the top spot for less than a year, will stay on in some capacity as vice-chairman of the Tesla board. “With SpaceX now having reached orbit and about to enter its third year of profitability, I can afford to increase time allocated to Tesla,” Musk wrote on his blog.

What he will do with that time is refocus the car company’s business on two areas of revenue: making and selling the $109,000 Roadster and building electric powertrains for other car companies. “Our goal as a company is to be cash-flow positive within six to nine months,” Musk wrote. “To do so, we must continue to ramp up our production rate, improve Roadster contribution margin and reduce operating expenses.”

The last bit means people will be losing jobs at the San Carlos, Calif.-based company – what Musk calls bringing a “Special Forces philosophy” to the business. It’s not exactly clear what that means (push-ups? tattoos?), but it doesn’t sound like a party.

The really big news for all of us that can’t afford $109,000 two-seaters – and the ranks are growing daily – is that production of Tesla’s next car, the not too, too expensive electric sedan dubbed the Model S, will be delayed six months to some time in mid-2011.

Once again, Musk offered to put his own personal wealth on the line if money gets tight. “We are not far from being cash flow positive, but, even if that threshold ends up being further than expected, I will do whatever is needed to ensure that Tesla has more than sufficient capital to get there,” he writes.

Wonder where Musk keeps his money?

The ad-disguised-as-comment for offshoring is pretty funny. That was yesterday’s model. Now, for just-in-time manufacturing, decreased transport costs, and a skilled workforce in established factories, look no farther than America.

Posted By Todd M. Phoenix, AZ : October 21, 2008 5:09 pm

Ultimately, I think Tesla’s future profitability will lie in licensing out patents and technology developed during the production of their roadster and sedan. The Big 3 (maybe Big 2 soon?) and major japanese and european car manufacturers will always be the source of cars for 99.9% of us, but many of their future vehicles will have roots in cars made by smaller startups like Tesla.

Posted By eric, torrance california : October 19, 2008 9:52 am

Musk pushed out Martin Eberhard, who was the true visionary of Tesla. It’s amusing to me that the reasons given for Eberhard’s ousting are production issues, profitability, and untimely delays; the same problems that Musk is having now. If the company fails, it is because Musk craves too much power. I wish the concept of the company well, but they need to get rid of him, not the real engineers and visionaries.

Posted By Robert Nashville, TN : October 17, 2008 9:10 am

Is this the same industry insider that is trying to convince everyone that a Hummer or a Ford Excursion will always have mass appeal? That there is no need to be concerned over $4/gallon gas?

Ever since that captain couldn’t pilot a ship out of Alaska the nation has been talking about the limited resource of oil…. That was what, 20+ years ago? I am not talking about the sierra club or some other tree hugging nuts but normal, everyday, middle of the road Americans. If your automotive insider had any clarity or ambition we would all be driving vehicles with a variety of power trains…. Weather they are powered by Hydrogen, Electricity, Biofuels or Crisco. Instead it is easier to say this company is done because there has been one bump in the road. If you follow the same reasoning should GM and Ford both be out of business right now?

I have been following this company very closely for the last couple of years, I am hoping they are able to succeed and take a large chunk out of the market share.

Posted By Pete, Columbia SC : October 16, 2008 12:48 pm

I’m really rooting for Tesla, whether I will ever have enough money to buy any of their cars or not. I’m also hoping that they can keep the layoffs to a minimum; it’s those people who got them to this point (not financially, product-wise). Elon baby, throw some money into the payroll!

Anyone know who else they are planning to sell drivetrain stuff to?

Posted By trm, Palo Alto, CA : October 16, 2008 11:15 am

“I have friends who have been automotive industry insiders for 30 years who tell me this company is done, baked, over, say goodnight…”

Yeah, and look how well they’re doing…

I think the Roadster is a brilliant way of convincing people that electric drivetrains are viable and sporty cars can be made from them. But the company needs to move the focus to a more practical application if they really want to start some cash flow.

Posted By John, Columbus, OH : October 16, 2008 7:58 am

is off-shoring going to be silver bullet for this problem ? It might not be, but it will definitely help reduce operational costs for these startups.

http://www.confiz.com
your offshore development partner

Posted By Anonymous : October 16, 2008 6:26 am

Not so. Margins are much higher on expensive cars, and practically non-existent on economy cars. New technology is always expensive at first, and sells only to those willing to pay top dollar. Prices decrease with scale. Think PC’s, CD players, VCR’s, cell phones. Tesla will take time to ramp up production to fulfill even the limited demand there is for cars that most people can’t afford. How much less money would they have in the bank if all the people who put down deposits had only paid $5k instead of $50k? How many people interested in $15k cars are willing to put down a deposit and wait 3 years for the car?

Posted By JT, San Francisco, CA : October 16, 2008 5:37 am

That’s what you get when you “concentrate” on a $109,000 vehicle that most people cannot afford.

That’s what you get when the “need” is a more cost-efficient vehicle in the marketplace, that most people can afford.

That’s what you get – duh – when people are flocking to the Toyota Prius.

The IDEA is Great! The Management and the Execution of the Plans are FLAWED!

If I was running this company…..I would FIRE Everyone and Start OVER!

What a WASTE. No…..wait.

Isn’t TESLA equal to “STALE”?????

Maybe you should’ve named the company something else….huh???

Posted By Ken, Silicon Valley in the big CA : October 15, 2008 11:51 pm

He keeps his money in TIPS, treasuries, where everyone else who’s gotten rich off the risky stock market puts their money.

Posted By george, spring, texas : October 15, 2008 11:30 pm

I have friends who have been automotive industry insiders for 30 years who tell me this company is done, baked, over, say goodnight…

And a number of ppl said that same of Google when they first came out. And about Paypall, spacex,etc.

The nice thing about start-ups like this, is that sooner or later, several will make it. The reason why your friends are saying that Musk is toast, is they believe that hybrids by GM are the way to go. I am guessing that electrics will be the big seller within 5 years. The reason is that few ppl driver more than 100 miles/day.

Posted By g.r.r., Highlands Ranch, CO : October 15, 2008 9:53 pm

Don (from Sunnyvale), that would be too bad.
It’s exciting to see pioneers such as Tesla on the automotive front. I am/was looking forward to what is/was coming down the pipeline.

Posted By Matt, Manchester, NH, USA : October 15, 2008 9:32 pm

I wouldn’t put much stock in the opinions of long-term industry insiders because they are the ones who’ve been caught with their pants down and are WAY behind the curve. It is their own fault that they did not have the vision to keep their industry viable.

Posted By lisa minnesota : October 15, 2008 9:13 pm

I have friends who have been automotive industry insiders for 30 years who tell me this company is done, baked, over, say goodnight…

Posted By Don, Sunnyvale, CA. : October 15, 2008 8:43 pm

To answer that last question—In his mattress!

Posted By Spankie, Athens, OH : October 15, 2008 8:13 pm
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