The question dogging investors is whether Elon Musk's self-styled "nano-manager" approach to overseeing Tesla - America's youngest major carmaker, and worth about as much as General Motors - will prove sustainable.
Tesla’s recent announcement that it had reached its long- delayed goal of making 5,000 Model 3 electric sedans in a week seemed like a triumph for Elon Musk’s intense management style.
The chief executive had created a makeshift factory under a tent in the carmaking plant’s parking lot. He torqued bolts on the assembly line and emailed employees about shadowy forces. He slept on the factory floor.
But now, the question dogging investors is whether Musk’s self-styled “nano-manager” approach to overseeing Tesla – America’s youngest major carmaker, and worth about as much as General Motors – will prove sustainable.
Musk’s bursts of energy have helped make Tesla one of the country’s most prominent and valuable automakers, a Silicon Valley challenger to Detroit that even its rivals contend has shoved American cars into the 21st century.
Meeting the Model 3 production goal, Musk told employees in a email Sunday, had pushed Tesla closer to its mission of accelerating clean energy and changing the world – even if they had taken some unconventional steps to get there. “Whatever,” he said. “It worked.”
But that same energy has also made Musk one of the most polarizing corporate leaders in America, a brash and demanding captain of industry who risks overshadowing his own creation. As Tesla neared its production target, Musk posted on Instagram what he labeled a “selfie”: an image of the superhero Doctor Strange, who wields mystical powers to change time and reality. “Engineering is magic,” he tweeted to his 22 million followers.
“He has achieved a lot by sheer willpower and is one of the most gifted people I’ve ever met,” said Bob Lutz, who has been a senior executive at each of America’s Big Three automakers, including vice chairman of General Motors. “He’s also one of the most flawed.”
Lutz described Musk as “a master salesman” and the ownership of Tesla vehicles or shares as “almost a religious cult.” “But he’s getting desperate,” Lutz said. “Like so many of these schemes, I think he’s rapidly running out of other people’s money.”
Musk has pitched the Model 3 as a mass-market, battery- powered vehicle that will guide the company into mass production and profitability. But manufacturing delays have turned recent months at the Fremont, California, plant into an all-hands, all-hours flurry of labor that Musk has called “production hell” – a time of factory fires, abrupt shutdowns and internal paranoia that the automaker this week said had been one of the “most difficult in Tesla’s history.”
Company critics and investment analysts questioned how long Tesla’s victory lap could last. The company said it delivered about 18,000 Model 3 sedans to customers in the second quarter – 10,000 fewer than Wall Street had expected – and had fulfilled less than 7 percent of the more than 400,000 orders on its years-old reservation list.
After passing the Model 3 benchmark, Musk upped the goal again, saying the company would hit 6,000 a week by the end of next month. Weary investors this week nevertheless sent the company’s stock plunging nearly 14 percent. In 15 years, the company has never earned an annual profit.
Traditional automakers are highly structured, hierarchical organizations, toughened by a high-cost, low-profit-margin business where buyers are fickle and competition is high. Their factories tend to be rigorously efficient, clean and optimized for mass output: The “Toyota Way,” a dogma of “lean manufacturing” governing principles such as respectful management and reducing waste, is often credited with helping turn the small Japanese car company into one of the biggest automakers in the world.
At Tesla, there is only what workers call the “Elon Way.” Musk is head engineer, designer, salesman, financier and marketer, with full power over everything from global sales strategy to the look of the retractable door handles. In a companywide email in April ordering the Model 3 be made “24/7,” Musk ordered a review of “every expense worldwide, no matter how small,” banned the use of acronyms, and urged workers to hang up on phone calls “as soon as it is obvious you aren’t adding value.”
Tesla’s race to build the Model 3 has made its Fremont factory, an old Toyota and GM plant, one of the most widely watched production facilities in the world, with observers flying drones along the fence and analyzing photos to build theories on daily production. In a striking contrast with other companies’ more clinically organized assembly lines, Tesla also shunted much of its production to what Musk called a “pretty sweet” big-top tent.
Branton Phillips, a four-year Tesla worker pushing to unionize the factory, said the open-air tent has fans but is “hotter than hell,” and he worried about the human cost of demanding more from factory-line employees already working 12-hour shifts and some mandatory weekends.
“There’s an all-out sense of desperation” among workers here, Phillips said. And “when you push them harder, that’s when dangerous mistakes are made.”
California’s workplace-safety watchdog said Thursday that it had opened a third investigation into factory conditions following complaints from employees, one of which involved an equipment accident that left a worker hospitalized with a broken jaw.
Tesla said in a statement that “nothing is more important to us than the safety of our employees. Our employees work very hard to help achieve a mission that all of us feel so deeply about, and they absolutely must be kept safe.” Tesla didn’t make Musk available for an interview.
The company has no formal organizational chart beyond a list of top leaders that includes only two names besides Musk’s. A third name, senior vice president of engineering Doug Field, was recently removed after the company said Monday he was “moving on” following a weeks-long leave of absence. Field did not respond to requests for comment. A successor has not been named.
More than 30 other high-ranking executives have left the company within the last year, including leaders in sales, hardware and engineering, according to a Washington Post estimate of top-level departures. Musk announced last month that the company would also be laying off 9 percent of its workforce – including some of the company’s 10,000 factory employees – as part of a “difficult but necessary” reorganization that he said would “flatten” the company’s management structure even more.
“He’s completely obsessed with every small detail, and he does not ever want to sit back and let his managers manage,” said Mike Ramsey, an automotive research director for the advisory firm Gartner. “You do wonder: How is it even possible to add in that many things and keep it all together?”
Many boosters have nevertheless seen a once-in-a-generation talent in Musk, whose boisterous curiosity and charisma have made him into a nerd hero and helped recraft the car company into the mold of a sci-fi wonderland. Tesla cars refuel not at gas stations but “Superchargers”; they’re built not in a factory but in a seemingly otherworldly “alien dreadnought”; and they hit the road with driving modes such as “Insane” and “Ludicrous,” named for how fast they accelerate.
Musk helped blow up Big Auto sacraments, such as car dealers, and reimagined how cars should work, with dashboard screens, self-updating software and long-range electric motors. In an age of dishwater-dull, battery-powered cars like the Toyota Prius, Tesla’s rebellious electrics drove, looked and felt like sports cars, with instant speed, clean lines and a halo of environmentalist chic. As Piper Jaffray analyst Alex Potter wrote last year, “Tesla engenders optimism, freedom, defiance and a host of other emotions that, in our view, other companies cannot replicate.”
Musk always seemed to be promising a new amazement, flitting from space travel (SpaceX) to artificial intelligence (OpenAI) to flamethrowers and underground supertrains (The Boring Co.). But Tesla remained small-batch, producing only two cars, the Model S and X, from a single plant at prices only the wealthy could afford.
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The Model 3, pitched to launch in 2014, promised to change that: Cheap and sleek, it would help expand Tesla’s sales pitch beyond just being a boutique creator for the automotive elite. The sedan was said to be priced around the average sales price of a new car in the U.S., or about $35,000.
After years of delays and a rush of preorders in 2016, the waiting list remains grim: The company has so far delivered about 28,000 Model 3 sedans, and its backlog for customers who already paid a $1,000 deposit could stretch on for another 18 months. Tesla’s focus on churning out pricier premium models has also made the base price Model 3 unattainable; the cheapest versions now sell for around $50,000.
Musk’s latest production milestone puts Tesla in line with some of America’s smaller car factories: The nation’s largest, Toyota’s plant in Georgetown, Kentucky, has the capacity to make more than 10,000 vehicles a week. When Musk tweeted “7000 cars, 7 days” alongside emoji hearts for the Tesla team, Ford executive Steven Armstrong – whose company Musk had recently said “looks like a morgue” – jabbed back that his company made that many cars in about four hours.
Even as bigger problems loom, Musk has turned his attention to the smaller things, using Twitter to taunt investors betting against the company (“burn of the century comin soon”) and skeptical analysts (“in for a rude awakening :)”). He also has sparred with journalists, anonymous commenters and other critics, including a woman who said he had improperly used her father’s artwork of a farting unicorn.
In recent emails, Musk has urged workers to stay “extremely vigilant” against a cabal of “organizations that want Tesla to die.” He also engaged in a tense exchange with a former employee sued by Tesla and accused of stealing trade secrets, calling him a “horrible person.” That former employee, Martin Tripp, says he is a whistleblower and that Tesla’s claims against him are “absurd.”
Musk’s obsession with the particulars has made him a target among shareholders seeking to replace him with a more predictable corporate captain. Tesla shareholder CtW Investment Group wrote in a May letter to fellow investors that “Musk’s peripatetic focus” had been “exacerbated, rather than contained,” by an “unduly deferential” company board.
Some have called for Musk to step back from leadership and become more of a “spiritual guide,” ceding day-to-day operations to an automotive specialist tasked with keeping the production running on time. As Tesla has struggled with mass production, other carmakers have caught up: A half-dozen stylish, premium-badged, long-range electric vehicles are expected to hit the road over the next 18 months.
There’s “a lot more serious analysis about whether Tesla should be all about Elon, and Elon alone,” said Karl Brauer, the executive publisher of the automotive research firm Kelley Blue Book. “The grandiose is great for headlines and great for the tech industry to continue to watch and be awed. But after a decade and a half, we haven’t seen it pay the bills.”
Yet Musk continues to attract an ardent fan base – including among his own employees. In one email to him in May, a Tesla technician raved about how Musk had come into the company’s battery-making Gigafactory in Nevada and “eliminated 80% of the problems we were having in about 20 minutes.”
“To have the head of a multi-billion dollar company working along side with ‘worker bees’ to me is something really extraordinary,” the technician said in an email, which he confirmed to The Post. “After that I have completely full confidence in this company, its leadership, and our workers. … Everyone is working (their) asses off!”