Tesla Hits a Speed Bump on the Road to Success

By KBB.com Editors on October 17, 2008 6:41 AM
Suffering from the same kind of economic malaise that's impacting more established automakers, Tesla Motors has announced some major changes in its plans, both current and future. In a statement made on its corporate website, Executive Chairman of the Board Elon Musk said his job duties will expand to include taking over as CEO, replacing Ze'ev Drori who will remain on the board of directors as vice-chairman. Musk cited the need to aggressively move the Silicon Valley-based builder of the world's highest-performance electric sportscar into a positive cash flow position within the next six to nine months. To reach that goal, Musk will focus the company's efforts on its two revenue-producing areas -- retail sales of the sleek, two-seat Roadster and providing EV powertrains to other companies. As a corollary function, he also plans to aggressively reduce operating costs, primarily by personnel reductions in the firm's 250-person work force.

As part of this new business plan, Musk also confirmed that Tesla will be closing its engineering offices in Rochester Hills, Michigan, and relocating that function to a new 89-acre consolidated headquarters to be built in San Jose, California. The firm is currently awaiting environmental approval to proceed with construction of this enlarged facility. Finalizing that authorization will also put a low-cost Department of Energy loan guarantee into effect, which will underwrite a large portion of the developmental budget for the upcoming Model S sedan. Musk anticipates that DOE help will become available sometime next spring.

Tesla still plans to show its upcoming Model S to the public early in 2009 but will delay final engineering, tooling and supplier contracting details until the corporate financial situation gets fully stabilized. That decision will result in the projected on-sale date for the new Model S moving from early in 2011 to a mid-year window. It will be interesting to see how everything plays out.
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