Elon Musk races to exit Tesla’s ‘production hell’
As company nears deadline to mass produce Model 3, Mr. Musk pushes back on doubters
FREMONT, CALIF. — Dressed in the same black Tesla Inc. T-shirt that he wore when he entered his car factory three days earlier, Elon Musk sat beneath fluorescent lights in a cluster of desks near the body shop.
On a chair next to him was a white caseless pillow that he used while sleeping on the floor under his desk. The billionaire CEO and chairman of the electric-car maker wasn’t far from two general assembly lines making the Model 3 sedan, surrounded by the sound of banging metal.
Outside, under a giant makeshift tent, workers were also building sedans on a third, hastily constructed line.
“We made a lot of mistakes. That’s why we’re here,” said Mr. Musk in an interview last week. He appeared calm, even upbeat at times, despite not having left the factory in three straight days, trying to ensure the company will finally meet his goal of building 5,000 Model 3s a week — after two missed deadlines. Today is the latest deadline; an announcement about production capacity is expected within days after that.
Mr. Musk and Tesla are at a crucial moment as the company aims to mass-produce the Model 3 and transform from an unprofitable niche player into a profitable major automaker. Tesla has about 40,000 employees and a market value of $58 billion, rivalling General Motors Co.
A maverick entrepreneur, Mr. Musk helped revolutionize online payments by co-founding PayPal, built a rocket company, SpaceX, valued at $21 billion, and with Tesla created a luxury brand popularizing electricvehicle technology that automakers dismissed for years.
Mr. Musk, who turned 47 years old on Thursday, sets a high bar with the hope that if he reaches a fraction of his goal, Tesla will be successful, people familiar with his thinking said. For all his success, Mr. Musk can be his own worst enemy, setting unrealistic expectations publicly and at times displaying an erratic management style that add to Tesla’s challenges, say investors, former Tesla executives and close observers.
“Organization and execution is where he doesn’t seem as good as other great leaders,” said James Anderson, who oversees the Tesla investment at Baillie Gifford, the automaker’s thirdlargest institutional shareholder, which holds nearly 13 million shares. He is “divided” on whether Mr. Musk is the right leader for Tesla going forward, but remains patient because of the potential.
“We are supportive for the moment, but it’s not necessarily permanent,” Mr. Anderson said.
Tesla has fallen six months behind schedule on Mr. Musk’s Model 3 production goal. The delays have stretched Tesla’s cash position, led Moody’s Investors Service to downgrade its debt and helped push its stock down 5.6% over the past year.
Mr. Musk stood onstage at a launch party for Tesla’s Model 3 sedan and warned employees they would be in “production hell.” He expected it to last six months or so. That was nearly a year ago.
He concedes some problems that led to the delay are of his own making. Asked if the “production hell” he predicted is self-inflicted, Mr. Musk shrugged. “Most people are their own worst enemy,” he said in last week’s interview.
As Tesla struggled to produce the Model 3, Mr. Musk brushed aside warnings from executives on production goals, complicated Tesla’s assembly process and spooked Wall Street by jousting with analysts.
At least 50 vice-presidents or higher-ranking executives have departed over the past 24 months, according to people familiar with the company, partly because of its acquisition of SolarCity Corp. Mr. Musk says he sees executive turnover as being in line with other large companies.
Some former executives say Mr. Musk’s drive can be invigorating, making them feel part of a bigger goal to change the world. But that wears away as he grows increasingly impatient, sometimes blaming managers for missing his improbable goals, they say.
A night owl, Mr. Musk often fires off emails at odd hours. After some late-night meetings, he forwards messages to underlings detailing an issue, adding only the recipient’s first name and a question mark.
Mr. Musk, whose other projects promise shuttles to Mars and tubes that whip people around the country, bristles at being told what’s impossible. “People have said that my entire life; what else is new?” he said last week. “They also said we couldn’t land rockets.” His venture Space Exploration Technologies Corp., or SpaceX, did that in 2016.
At Tesla, Mr. Musk wanted to reinvent the assembly process as the company prepared to reveal the Model 3 in early 2016.
He began talking about “the machine that builds the machine” and envisioning a peoplefree factory that could churn out cars at a rate only slowed by air resistance.
Tesla had initially planned to gradually increase Model 3 production with the goal of making a total of 500,000 vehicles, including other models, in 2020, according to people familiar with the plan. That would let new revenue from the mainstream car pay for Tesla’s expansion, they said.
But Mr. Musk wanted to accelerate production after surprisingly strong interest in the Model 3 — Tesla received 180,000 reservations in the 24 hours after announcing the car, which has a starting price of $35,000.
His executives pushed back, warning it wasn’t feasible because the design of the car wasn’t yet locked into place, the robots and tooling needed to be ordered, and time was needed to work out inevitable kinks in the complicated assembly process until the end of 2017, say people familiar with the conversations.
Mr. Musk sped forward, publicly declaring in May 2016 that Tesla would make as many as 200,000 Model 3 cars in the second half of 2017. Tesla ended up making about 2,700.
Mr. Musk, in last week’s interview, defended his decision to advance the timetable. Some executives are looking to “externalize responsibility and say it was anything but their fault,” he said.
He said if anything, he should have “constrained the time further” because Tesla would have discovered faster an approach that wasn’t working and corrected course.
In July 2017, Mr. Musk announced production had begun and scaled back plans, promising 20,000 Model 3s in December. Tesla was still hand-building parts of the Model 3s in the early weeks of production. The body shop wasn’t fully installed until September and took weeks of calibration to ensure robots avoided collision amid the ballet of welding the vehicle together.
Tesla installed 1,028 robots in its Fremont body shop, roughly one-third of which were uniquely hung upside down so the company could cram more into the Fremont space.
Mr. Musk thought keeping the robots close to each other would boost efficiency, people familiar with the effort said.
At Tesla’s battery factory outside Reno, Nev., the designs for the automated robots were so complex they couldn’t get the batteries made. In October, Mr. Musk camped at the factory, posting a video on social media of himself with a plastic cup of whiskey, roasting a marshmallow on the roof as he sang Johnny Cash’s “Ring of Fire.” He tweeted: “Production hell, ~8th circle.”
Tesla’s Fremont factory struggled to implement Mr. Musk’s dream of an automated conveyance system running beneath the general assembly line. Unlike typical car factories where workers deliver parts to workstations, Mr. Musk wanted crates to shuttle parts to automated elevators that would lift the right number of pieces at the right time. Tesla invested $80 million to $90 million in an automated warehouse system, according to a person familiar with the effort, but engineers struggled to make it work.
Tesla ripped out part of the conveyor system and hired more workers to run parts around the factory. The company later used the conveyor for the makeshift assembly line under the tent outside to improve the odds of meeting the 5,000-a-week goal, believing it could handle, at most, 7,000 cars a week, according to a person familiar with the matter.
Mr. Musk concedes he relied too much on automation. “You really want to get the process nailed down and then automate, as opposed to assuming you know what the process will be, then automating that,” he said in the interview.
Some of his atypical manufacturing ideas may still pay off. Tesla makes its own seats for the Model 3, a move it says saves costs. And at the body shop, where the vehicles are welded together, Tesla estimates it may be able to save 36 people a shift by automating the process of loading some material into the line.
After Mr. Musk inflamed Wall Street in May during Tesla’s quarterly financial call by cutting off analysts — “Boring bonehead questions are not cool,” he said — he sought to make amends by calling some of Tesla’s largest shareholders, including Baillie, Fidelity Investments and T. Rowe Price to assuage concerns, people familiar with the matter said.
Fidelity and T. Rowe declined to comment.
Mr. Musk has spread himself across other projects. A recent seven-day stretch saw him overseeing a SpaceX rocket launch, announcing a management reorganization at Tesla, criticizing the media on Twitter for covering the crash of a Tesla vehicle in Utah using driver-assistance technology and appearing in Los Angeles to promote a side project, the Boring Co., to dig a tunnel beneath the city.
He acknowledged he is spread thin, but says he’s focused on the production goal.
“I’m feeling good about things,” he said. “I think there’s a good vibe—I think the energy is good; go to Ford, it looks like a morgue.”
He said he just learned the phrase “What’s your vibe?” from his new girlfriend, the musician known as Grimes. Earlier in the day, Draymond Green, the Golden State Warriors star fresh off winning an NBA championship, stopped by the factory.
Later that day, Mr. Musk flew to Salt Lake City to recruit artificial-intelligence talent at a conference. He planned to return to Fremont a few hours later.