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Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

October 15, 2008 at 12:57 PM

Tesla Motors cutting staff, shifting CEO, delays sedan

Tesla Motors founder Elon Musk just announced on his blog that he’s moving in to the chief executive role and cutting back on staffing.

Specifically, the company’s closing a Detroit-area facility and consolidating at its new headquarters/factory in San Jose.

Tesla is still planning to open a showroom/service facility in Seattle next year, spokeswoman Rachel Konrad said, but “in principle that could be delayed, given the broader liquidity crisis globally.”

Musk said in the blog post:

One of the steps I will be taking is raising the performance bar at Tesla to a very high level, which will result in a modest reduction in near term headcount. To be clear, this doesn’t mean that the people that depart Tesla for this reason wouldn’t be considered good performers at most companies — almost all would. However, I believe Tesla must adhere more closely to a special forces philosophy at this stage of its life if we aspire to become one of the great car companies of the 21st century.

There will also be some headcount reduction due to consolidation of operations. In anticipation of moving vehicle engineering to our new HQ in San Jose, we are ramping down and will close our Rochester Hills office near Detroit. Good communication, tightly knit engineering and a common company culture are of paramount importance as Tesla grows.

Tesla’s chief executive for the past year, Ze’ev Drori, becomes vice chairman.

Musk said Tesla is still proceeding with its second model, a sedan to be unveiled next year, but its release will be delayed at least six months.

He said Tesla will “reduce activity on detailed production engineering, tooling and commitments to suppliers until our Department of Energy loan guarantee becomes effective.”

“The DOE loan guarantee will cover most of the Model S program at a very low cost of capital compared with raising equity financing in what could quaintly be described as a “bear market.” The loan funding can only be drawn down after we receive environmental approval for our new 89-acre consolidated headquarters in the city of San Jose. If all goes reasonably well, we will receive that approval in Q2 next year.

The net result will be a delay in start of production of the Model S of roughly six months to mid-2011. On the plus side, we will spend the extra time refining the vehicle design and powertrain technology, so the car will end up being slightly better.”

Musk also sought to reassure buyers still waiting for their Tesla Roadsters to be delivered.

If you have bought a car from Tesla or are thinking of doing so, please know that I personally stand behind delivering a product that you will love and continuing to develop new models in the future. 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.

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