Tesla’s latest surprise: short tenure for top lawyer

“I don’t think it’s a coincidence that the general counsel is leaving after a tweet that appears to violate the agreement.” Rebecca Lindland, RebeccaDrives website

After lurching from crisis to crisis last year, Tesla appeared to have found its footing in January when it reported its second consecutive quarterly profit and said it had more than enough cash to pay off bonds coming due in March. The calm did not last. This week, Tesla said its general counsel was leaving the job after just two months. It was the second unexpected departure of a high-level executive in less than a month and one of dozens in the last three years.

The general counsel, Dane Butswinkas, was a prominent Washington trial lawyer who represented CEO Elon Musk when he was sued by the Securities and Exchange Commission last year over claims that he had secured funding to take the company private. Tesla said Butswinkas had decided to return to his law firm and would be replaced by Jonathan Chang, a vice president in its legal department.

On Jan. 30, Musk surprised analysts on a conference call by announcing that Tesla’s chief financial officer, Deepak Ahuja, would retire without saying exactly when. Last year, the chief accounting officer, David Morton, stepped down after just a month on the job. Morton’s predecessor, Eric Branderiz, left after 14 months. All told, Tesla has lost more than 40 senior executives since the beginning of 2016, according to a list compiled by Reuters.

Butswinkas’ departure was all the more noteworthy because it came less than 24 hours after Musk made an ambitious prediction on Twitter about the company’s production goals, an action that raised questions about his compliance with the settlement that he and Tesla reached with the SEC.

Musk said that he expected the company to produce 500,000 cars this year — 100,000 more than he had forecast just three weeks earlier. Four hours later, Musk said he had misspoken.

In the settlement with the SEC, he and Tesla had agreed that it would put in place “mandatory procedures to oversee and preapprove Mr. Musk’s Tesla-related written communications” that might have material information. A Tesla spokesman declined to comment on what scrutiny had been given to Musk’s incorrect statement before it was posted.

The SEC’s securities fraud case stemmed from a Twitter post in August in which Musk said he planned to take the company private at $420 per share and had “funding secured.” In addition to the condition about reviewing his statements, Musk agreed to step down as chairman; he and the company each paid penalties of $20 million; and the company added two new independent directors.

“I don’t think it’s a coincidence that the general counsel is leaving after a tweet that appears to violate the agreement,” said Rebecca Lindland, executive editor of the auto industry and car review website RebeccaDrives. “It calls into question the oversight of the board and the adherence to the SEC settlement.”

The SEC and the Justice Department have been looking into whether Musk misled investors about its production goals. Musk had once predicted that Tesla would make 500,000 cars in 2018. The company actually made about 245,000 cars last year.

Tesla said in a securities filing this week that it “will continue to cooperate with government authorities.”

The stream of executive departures is one of several challenges for Tesla. It is scrambling to secure financing to build a plant in China, one that Musk has vowed would begin churning out cars by the end of this year. Sales of its two most profitable models, the Model S luxury sedan and the Model X SUV, are flat. And it is still unable to produce a $35,000 version of the Model 3 sedan, which many customers are holding out for.

Next month, Tesla has to pay bondholders $920 million, which would consume about a quarter of the $3.7 billion it had in cash at the end of December.

The company’s stock closed down 1 percent Wednesday and fell farther on Thursday before rising by 1 percent on Friday.

Tesla’s sales appear to have dropped off markedly since the beginning of the year, when a federal tax credit available to Tesla customers was cut in half, to $3,750. An online publication that follows Tesla closely, InsideEVs, has estimated that the company sold 6,500 cars in January, a 75 percent drop from the final months of 2018, when buyers could still take advantage of the full tax credit.

Tesla has declined to comment on the estimate, but customer traffic appears to have dropped off significantly at its showrooms. On Saturday afternoon, a saleswoman at a company store near Pittsburgh showed a customer a Model 3 while six other employees stood idly by. While more than 50 Teslas were parked in the back, just two cars were parked in spots reserved for prospective buyers.

In addition, as production and sales have increased, so have complaints about quality and customer service. Many customers have had to wait months to have their cars repaired because of shortages of replacement parts.