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Tesla Motors sputters as Big Three get jump-start

Chrysler, Ford and GM are busy using up the $25-billion jump-start they received last month and their economic outlook is far from rosy. But it is the upstarts—in specific, electric car company Tesla Motors—facing the roughest road because they don't have the track record for access to cheap cash.

As the credit markets have seized up, Tesla has been forced to restructure and has entered a "critical phase" financially, according to a company blog post. Tesla will be abandoning Detroit and digging in at its new corporate HQ in San Jose as well as laying off an unspecified number of its 250 employees. Its primary financial backer, Elon Musk—whose SpaceX rocket finally took flight, successfully putting a payload into orbit—will also return to the helm of the company, shifting current CEO Ze'ev Drori to the board of directors. He had been in the job for a little less than a year.

Although the company has delivered its first 27 cars—the inaugural $100,000 Tesla Roadster went to, you guessed it, Mr. Musk in February—it has been plagued with some surprises and management turmoil. For example, the car's original designer, Martin Eberhard, who was ousted last August, reportedly for burning through cash too quickly, was surprised to discover that the car uses electricity to run a cooling pump even when parked: more than three kilowatt-hours a day, according to his blog, or nearly twice as much as a large refrigerator. That’s a lot of wasted energy.

The company will also "suspend" its foray into the affordable car realm. The planned "Model S" will wait and see if federal loan guarantees that could unlock easy credit come through, according to the company blog. That means the Chevy Volt will likely win the race as the first electric car to market, beating the Tesla Model S to the public by at least six months. In the meantime, "the wise course of action is to focus on our two revenue producing business lines—the Roadster and power train sales to other car companies."

Of course, if car companies like GM can't make do with $25 billion, this could get a whole lot worse for Musk. He also said: "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."

Credit: Courtesy of Tesla Motors

 

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