Solar staff diverted to save Tesla
Musk shifted firm’s resources to avoid bankruptcy, he says.
Tesla Inc. Chief Executive Elon Musk said he shifted resources from the solar company he bought three years ago to save his electric-car company from bankruptcy while it was ramping up production of the Model 3.
Musk made the admission as part of a lawsuit filed by Tesla investors over the company’s 2016 buyout of SolarCity, a solar panel installer. Disgruntled shareholders contend Tesla directors rolled over when Musk pushed to buy the renewable-energy company. Musk was SolarCity’s chairman and largest shareholder at the time and his cousin was the chief executive.
“If I did not take everyone off of solar and focus them on the Model 3 program to the detriment of solar, then Tesla would have gone bankrupt,” Musk said in a June pretrial deposition made public in state court in Delaware. “So I took everyone from solar, and said: ‘instead of working on solar, you need to work on the Model 3 program.’ And as a result, solar suffered, as you would expect.”
Pension funds opposing the SolarCity buyout say in court papers that Musk should have told them that Tesla was in no condition in 2016 to buy a $2-billion company and that it would be forced to rely on that firm’s manpower to keep Tesla afloat.
Tesla now has roughly 400,000 solar customers, one of the nation’s biggest renewable-energy portfolios. But Walmart Inc. sued Tesla in August, saying the company’s rooftop systems caused fires at its stores and warehouses. Tesla has also reached out to homeowners across the U.S. to tell them their solar systems need preventive maintenance.
Tesla’s rooftop solar business rose for the first time in a year, the company said during its earnings report Oct. 23. Tesla deployed 43 megawatts of solar in the third quarter, up 48% from the previous three months.
In its earnings report last week, the electric-car maker said it earned $1.86 a share, surprising Wall Street. Musk delivered several positive updates: The company’s new factory in China is on track and the Model Y crossover SUV will launch earlier than expected. Tesla shares, which had languished for much of 2019, closed Tuesday at $316.22 and are down just 3.5% for the year.
Musk acknowledged in the June 1 deposition — unsealed Friday — that he probably wouldn’t support the SolarCity acquisition again given the stress Tesla faced from the Model 3 push.
“At the time I thought it made strategic sense for
Tesla and SolarCity to combine. Hindsight is 20/20,” he said. “And if I could wind back the clock, you know, I would say probably would have let SolarCity execute by itself; would have let Tesla execute by itself.”
“But I just didn’t realize how difficult it would be to do the Model 3 program,” Musk added. “And so that was just a big distraction and sort of offset a lot of things by more than a year, year and a half maybe.”
To deal with that internal stress, Musk said, scores of SolarCity employees — from engineering, management, sales and service — were transferred to the Model 3, the first electric car Tesla sought to produce in high volume. Some of the SolarCity workers were deployed to Tesla’s retail stores and delivered cars to customers, according to Musk’s deposition.
Tesla delivered a record 97,000 vehicles in the third quarter and the company’s surprise profit gives the company some breathing room. Executives have begun talking up the energy side of its business again.
On Friday, Musk held a conference call focused on “Version 3” of the company’s solar roof product, which was first revealed three years ago. “It’s been quite hard,” Musk said. “Roofs need to last a long time. When you add electrification to the roof, it’s a fair bit of complexity.”
The 48-year-old Musk, who has had his share of runins with lawyers over the years, got combative with Randy Baron, a Californiabased lawyer for Tesla shareholders challenging the wisdom of the SolarCity acquisition. They’ve sued the company’s board in Delaware Chancery Court.
At one point, Musk called Baron “reprehensible” because the lawyer — according to the Tesla CEO — questioned whether SolarCity was a viable entity and the validity of sustainable energy as a whole.
“You seem like a very, very bad person,” Musk said in the deposition.