Last week, Tesla Motors acknowledged that it is losing money, struggling financially, laying off employees, and closing its Detroit-area office. At this point, fewer than 50 vehicles have been delivered to customers—and those were delayed by nearly a year after a series of key technical problems. It’s unknown how long it will take for the company to deliver the $109,000 Roadster to 600 customers with confirmed orders.
Could the Tesla dream—the creation of an electric car company in the mold of a Silicon Valley start-up—be falling apart? Elon Musk, the company’s primary financial backer and now its CEO—Tesla’s fourth chief executive in three years—says he is unwilling to let that happen. No matter the cost.
Musk has already invested more than $55 million of his fortune into the company, according to a recent 60 Minutes interview in which he confessed that Tesla has spent twice its initial projected costs. And apparently, Musk is ready to invest more, if necessary. In a recent blog post on the Tesla website, he wrote: “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.” Musk was the co-founder of PayPal, and has an estimated fortune of more than $300 million.
The personal cost goes beyond money. Word on the street is that Musk is working at a feverish pitch to deliver on the company’s ambitious goals. Last year’s profile of Musk in Inc. magazine portrayed him as a man on the edge—downing a daily dose of eight cans of Diet Coke and several large cups of coffee.
“ When he sighs, which he does frequently, his chest heaves, and his eyes widen, like someone confronted with news of his own death. He generally speaks in complete, precise sentences, rarely telling a joke or even cracking a smile… Sitting in front of the oversize computer screen on his desk, he rolls back and forth in his chair, slouches and unslouches, rubs his temples, raps his fingers, and plays with his wedding ring.
Musk’s life was recently further complicated by the announcement that he and his wife are filing for divorce. They have five sons under the age of 6. (By the way, Musk is also the CEO of SpaceX, an aerospace company that by 2011 plans to haul astronauts to and from the International Space Station. Musk’s business plan for SpaceX includes helping to colonize Mars.)
Apparently, Musk wants his employees to share his relentless drive to achieve the most difficult—some might say impossible—dreams. In his first corporate blog as CEO, he writes:
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.
Electric Car Special Force Commandos
The Special Force Tesla commandos will have an exacting commander at the helm. Insiders say he is involved in nearly every decision the company makes, down to the smallest details of design. This microscopic level of management is what led to the ouster of the company’s founder and former CEO Martin Eberhard. Musk and Eberhard clashed over small details, financial management, and the overall design philosophy for the Roadster—with Eberhard pushing to minimize engineering and high-cost setbacks, and Musk trying to build a sports car that could outperform its gas-guzzling competitors regardless of cost. Eberhard was willing to roll out the first production vehicles with a slower single-speed transmission and upgrade later to a faster 2-speed system that could deliver zero-to-60 acceleration times below four seconds. Musk insisted, at the time, on speed—but due to engineering setbacks, the company had to fall back to the single-speed transmission for its first customers. (Subsequently, Tesla upgraded to a faster single-speed gearbox with improved motor control electronics.)
Perhaps the biggest setback announced last week is the delay of the company’s Model S—Tesla’s more modestly-priced $60,000 all-electric sedan. The plan all along was to start with the luxury sports car as a stepping-stone toward the mainstream. The delay pushes production of the Model S to 2011, at the earliest.
Setbacks and criticism are nothing new for Tesla and Musk. From Tesla’s earliest days, critics questioned the Roadster’s core energy strategy—powering a new ground-up vehicle via 6,831 laptop batteries all wired together. Naysayers said the battery system was simply not practical, and could possibly short-circuit or catch fire. Undaunted, the company pushed forward with its big dreams. In that regard, little has changed. There’s no indication that Elon Musk has lowered his long-term expectations for the company in the slightest. Despite last week’s news, he continues to accelerate faster than an all-electric sports car or a fiery space rocket.