Tesla Layoffs and Management Changes

[Chris H.]

Earlier today Martin, or somebody claiming to be Martin, made this post on the Tesla Founders blog:

"Seems like more cabbage is going down at Tesla right now. Big cabbage, so it seems."

Martin, was this yours? If so, is it possible that you can elaborate? If not, then I'm sorry for making a fuss over nothing.

ATB,

Chris.

 

[vfx]

The next message says:

Hi Martin,

could you possibly elaborate?

ATB,

Chris.

Martin sez:

The company’s new CEO is “holding people accountable at all levels, and that starts at the top.” -Darryl Siry, Venture Beat, 11 January 2008

Comment by Chris Harvey October 14, 2008 @ 2:14 pm

 

[jsnable]

Pure rumor, but:

Rumormonger: Tesla said to lay off 100

 

[dpeilow]

Autocar - Tesla in trouble?

Autocar - Tesla in trouble?

According to reports from America, Tesla Motors is laying off 100 staff, more than half of its workforce, as a result of the global financial crisis.

The fledgling electric car company’s CEO Ze’ev Drori is also said to be leaving.

 

[DDB]

Sooner or later the financial mess was going to affect Tesla--I just figured later because the immediate concern seemed to be producing the Roadster for current customers who plucked down the cash. Although it's clear that a whole lot of capital (and credit) would probably be needed for its new plant for Whitestar. If it's true, Tesla will not be able to keep a lid on 100 employees leaving...and MANY would-be customers would be hesitant to put deposits on a car when the Company may not be around in a year. Tesla can probably count on oil going above $80 shortly, which may help.

 

[graham]

The Tesla Death Watch weighs in:

Tesla Death Watch 23: Tesla In Trouble. Or Not. | The Truth About Cars

As much as I’d like to join the rest of the autoblogosphere and simply repeat the news that Tesla’s about to terminate 100 employees and maybe their CEO (named after an Isaac Asimov character) and then say “I told you so,” I can’t. As far as I can tell, it’s nothing but a rumor. I’ve managed to trace back the report to Jalopnik, that links to a tiny item on the affiliated Valleywag website. “In our inbox, rumor of a staggering blow to one of Silicon Valley’s new growth industries: Tesla Motors, a tipster tells us, is laying off 100 people, about half of its staff. CEO Ze’ev Drori is also leaving, he claims.” The fact that Tesla hasn’t moved to squash this report, which has already circled the globe, shows that either it’s true or untrue (and someone at Tesla really needs to set a Google alert). I’ll go out on a limb and call bullshit. As long as Tesla has such a high media profile, this PR scam conmpany has a lot more mileage left in it. For which the Lord has made us truly grateful.

 

[malcolm]

I imagine that Zeev is quite keen to get back to enjoying his retirement - his departure could have been planned for a while now.

Or is he being 'Transitioned to the Tesla Retirement Home'?............

 

[WarpedOne]

Elon new CEO?
It could be funny but it's just sad.

 

[vfx]

Wow, a car company with the uncertainty of a Political campaign.

 

[graham]

Well, it has to be pretty difficult for them cash-flow wise. I assume all the deposit money they have taken in has been used for operating expenses to get them this far. So they now need to find money to build the cars already paid for, and set up the logistical nightmare of getting all the parts to the right place at the right time which I am sure costs more up front.

They received money in 2006-2007 for the cars they are building now. So the cars they have built thus far they have gotten no current money for. They have to pay for the parts to build at least 100 more cars before they start getting in any new money at all... and then it will be only be half the cost of the parts to build it for another several hundred cars. Eventually they will get to the point where the money paying for the car will actually pay for the car instead of for keeping the company afloat while designing the car... but they have a large amount of expenditures before they get there.

They have a bunch of new money coming in from the state and from San Jose, but that is all earmarked for the Whitestar stuff. Getting there will be hard unless they can squeeze out enough money to get to the Roadsters which actually bring in new money.

I can see them laying off half the company to get to that point, and then hiring the positions back next Spring/Summer when they have a revenue stream.

 

[tomsax]

Tesla Cash Flow

Well, it has to be pretty difficult for them cash-flow wise. I assume all the deposit money they have taken in has been used for operating expenses to get them this far.

I don't think that's right. They have about 900 customers who have production sequence numbers, meaning they have put down more than the $5,000 initial deposit, plus somewhere around 300 more who have made just the 5k deposit. If we assume an average deposit of 60k, that works out to 900*60k+300*5k = $55.5 million, plus or minus $10 million.

We also know that Elon has put in about $60 million (as stated in his 60 minutes interview), plus tens of millions more from other investors. So, the deposits account for less than half of their cash input. Elon has also promised that he will personally guarantee that the company will remain afloat until all of the ordered cars are built. "You have my word," he said. (Owner's Town Hall in Jan, 2008).

When Cathy and I did our test drive in September, 2007, we asked Zak something about why they don't spend money on some improvement and his response was that they don't want to spend the owner deposits. So, I believe they are not just spending the deposit money and counting on new sales to finance the cost of building pre-ordered cars.

Tesla Motors isn't a sports car company. The Roadster is about developing EV technology, creating interest and making a modest profit. Tesla is more about Model S and Blue Star. I don't think they are foolish enough to bet the entire company on the cash flow from short-term Roadster sales, especially not before they have delivered enough of them to assure potential customers that they can follow through and deliver cars.

 

[Kardax]

I was about to post a reply, but then I see tomsax has written a much better one already

-Ryan

 

[Kardax]

Actually, if Tesla is still trying very hard to avoid spending deposit money, the layoffs could be for that very reason. None of the investors want to dilute their shares with another financing round, so cutting costs can help keep things going until Roadster production is at full speed.

-Ryan

 

[graham]

I don't think that's right. They have about 900 customers who have production sequence numbers, meaning they have put down more than the $5,000 initial deposit, plus somewhere around 300 more who have made just the 5k deposit. If we assume an average deposit of 60k, that works out to 900*60k+300*5k = $55.5 million, plus or minus $10 million.

Oh? I was under the impression that the Signature 100 folks (and maybe others?) had all paid 100% for their cars back in 2006 or 2007. I didn't realize they had only put down a deposit as well.

We also know that Elon has put in about $60 million (as stated in his 60 minutes interview), plus tens of millions more from other investors. So, the deposits account for less than half of their cash input. Elon has also promised that he will personally guarantee that the company will remain afloat until all of the ordered cars are built. "You have my word," he said. (Owner's Town Hall in Jan, 2008).

Yup. I wasn't doubting his word, I was just lending credence to the rumor that they may decide to lay off 50% of the company to meet that goal.

When Cathy and I did our test drive in September, 2007, we asked Zak something about why they don't spend money on some improvement and his response was that they don't want to spend the owner deposits. So, I believe they are not just spending the deposit money and counting on new sales to finance the cost of building pre-ordered cars.

Ah... very interesting quote. Perhaps I am very mistaken in my assumptions then. I had asked Tesla when I put my deposit down if they were going to use an escrow service like CommuterCars for the deposits. When I was told that they were not, I made the assumption they were using the money as it came in.

Tesla Motors isn't a sports car company. The Roadster is about developing EV technology, creating interest and making a modest profit. Tesla is more about Model S and Blue Star. I don't think they are foolish enough to bet the entire company on the cash flow from short-term Roadster sales, especially not before they have delivered enough of them to assure potential customers that they can follow through and deliver cars.

*nod* I agree. I was just speculating on the veracity of the 50% layoff rumor. One reason it may be true is to staunch their spending long enough to get through enough Roadsters that they pay for themselves and they start receiving the Whitestar loan money. If they have truly put all the deposit money aside, and they are currently receiving at least 50% of the car value while they build them, my musings may make no sense.

 

[graham]

Ah... The Register claims that layoffs have been confirmed by Tesla:

Layoffs, boardroom reshuffles at Tesla Motors ? The Register

Rumours of layoffs and management reshuffles at Tesla Motors - maker of the famous but as-yet-scarce Roadster electrosupercar - have been confirmed. In the next few hours Elon Musk, Tesla chairman, is expected to announce that he has formally superseded Ze'ev Drori as CEO. Details of "strategic layoffs" will also be revealed.

A Tesla representative confirmed the moves to the Reg this afternoon. It appears that Mr Drori will remain at Tesla, assuming the title "vice chairman" and remaining on the board, while Mr Musk assumes even greater day-to-day control of the firm.

Rumours had been circulating all day that changes at Tesla were afoot, with suggestions made that 100 employees might be let go in California - as much as half the existing staff. Mr Musk is expected to go into some detail on the corporate blog network as to just who will be departing, but the Reg was told that the higher figures are "grossly exaggerated". The layoffs are said to be "in response to the global liquidity crisis".

So layoffs, and a demotion of Ze'ev... but not as much as half the company that the rumors claim.

 

[graham]

Some additional reports:
Greentech Media: Green Light Blog Archive Musk Takes Over as Tesla CEO

You’ll hear this officially soon, but Elon Musk, one of the founders of Tesla Motors, is taking over as CEO. Ze’ev Drori, the CEO who took over for Martin Eberhard last year, is becoming vice chairman.
Layoffs are also expected.

And Motor Trend -- mostly sourcing the Autocar rumor:
Short Circuit? Reports Claim Tesla Motors To Cut 100 Employees, CEO Included | Automotive News Blog - Wide Open Throttle

 

[tomsax]

Oh? I was under the impression that the Signature 100 folks (and maybe others?) had all paid 100% for their cars back in 2006 or 2007. I didn't realize they had only put down a deposit as well.

Here's what I know about the deposits:

Signature 100 owners put 100% down, pre-paying for a fully loaded Roadster, non-refundable.

The next hundred (plus a few) put down $70,000 for a fully loaded Roadster, refundable until the lock-in date.

The next group could put down $50,000 or $30,000, with the smaller deposits going into line after the larger deposits. These owners get to choose options, like the speaker and head unit upgrade, the hard top, the mobile charger, etc., and are refundable until the lock-in date. This group filled out the 2008 model year.

The 2009 model year owners started with a $5,000 deposit, with a deadline to put down another $60,000 in order to lock in a production number. About 300 of these owners missed their deadline for the second deposit and were all moved to the end of the list in September.

Some owners in the 2008 model year bailed out and those slots are being sold at the end of the 2008 list. Customers who want one of those cars have to put down the entire $125,000 up front.

So, the deposits range from $30,000 to $125,000. $60,000 is just my guess at where the average is. The average depends most strongly on the split between $30k and $50k for the 400 2008 owners who came in after the second hundred. A more careful analysis suggests that the average deposit is between $55,000 and $57,000.

Ah... very interesting quote. Perhaps I am very mistaken in my assumptions then. I had asked Tesla when I put my deposit down if they were going to use an escrow service like CommuterCars for the deposits. When I was told that they were not, I made the assumption they were using the money as it came in.

The deposits are not in an escrow account, and they are free to use it if they so choose. Thus if they go under, I expect we will lose our deposits. But, the deposts are not their primary source of capital. Also, I think it would be reckless to spend a significant portion of the deposits on anything other than direct production costs. I trust Tesla to be more responsible than that.

Cash flow arguments aside, I can't imagine they could lay off half of the company and continue work on Model S without totally blowing their late 2010 goal.

 

[Alpine Driver]

just not to forget the european deposits, EUR 50.000,00 which are - at the moment - about USD 67.500,00.
There are different figures saying something between 70 and 100 EU-spec cars are sold - but this info is a month old.

 

[TEG]

... Tesla is more about Model S and Blue Star. I don't think they are foolish enough to bet the entire company on the cash flow from short-term Roadster sales...

Don't forget that they intended to fund "Model S" (AKA "Whitestar") from an IPO.

It seems like general market conditions for an IPO look rather dodgy at the moment...

 

[malcolm]

Quick people!

Take one last look:-

Tesla Motors - our company

Tesla Motors - our company