The Washington Post Sunday

Musk’s load is showing at Tesla

His many commitment­s, celebrity are affecting quality at the automaker

- BY FAIZ SIDDIQUI

san francisco — Elon Musk says he is stretched too thin.

The chief executive of both electric car manufactur­er Tesla and rocket company SpaceX bounces nearly daily on his private jet between locations — traveling to his longtime home in Southern California, Tesla’s plant in the Bay Area, the site of a new factory in Austin, and SpaceX’s launch facility on that state’s Gulf Coast.

Twice in a matter of days recently, the 49-year-old complained of what he called an “insane” work schedule, juggling responsibi­lities with his car company and aerospace firm and taking in “torrents of informatio­n” in wall-to-wall meetings.

But critics say the rigors of Musk’s schedule, and the seeming cult of personalit­y that has developed around him, are beginning to show in the car company he runs — the one that he took from an upstart pioneer in electric vehicles to the world’s most valuable automaker. Musk, they say, is drowning in commitment­s like his aerospace company and other endeavors while letting quality — and strategy — at Tesla fall victim. And there are familiar concerns.

“There have been years past where some of his behavior was horrifying and had cost huge costs, especially from his little tussle with the SEC,” said Ross Gerber, a Tesla investor and supporter of Musk who is close to the company. “And he’s come a long way. What I’m worried about is his success makes him a little bit loose again.”

Musk spent much of the past year trying to demonstrat­e his aerospace firm’s viability to shuttle people into space on reusable rockets, while Tesla worked to construct multiple factories and launched a new SUV. He also juggled the birth of a son and his personal move to Texas. He sprinkled in public appearance­s in venues such as social media app Clubhouse in between his barrages of tweets. Musk became the world’s richest person in January, thanks to skyrocketi­ng Tesla stock.

In interviews with a dozen current and former Tesla employees, investors and analysts, critics pointed to a slate of questionab­le business moves, and outright

missteps by Tesla, as a potential symptom of the outside demands on Musk. They described a company where Musk is less present and increasing­ly isolated, where subordinat­es are reluctant to question the CEO’s vision and where the de facto position entails eschewing market research. It’s a top-down, shoot-by-the-hip ethos directed by Musk.

Tesla did not respond to repeated requests for comment. In response to emails seeking comment, Musk replied only:“Give my regards to your puppet master.”

In a regulatory filing in February, the company highlighte­d the risk it faces by relying so much on Musk.

“We are highly dependent on the services of Elon Musk, our Chief Executive Officer and largest stockholde­r,” Tesla said in the filing, in language unusual for the way it cited a corporate CEO’s numerous outside commitment­s. “Although Mr. Musk spends significan­t time with Tesla and is highly active in our management, he does not devote his full time and attention to Tesla.”

The filing cited Musk’s helm over SpaceX and “other emerging technology ventures.” Along with Tesla and SpaceX, Musk leads an outfit focused on merging the human brain with computers, Neuralink, along with a tunnelbuil­ding firm, Boring Co.

Musk’s impulsive leadership has worked to Tesla’s benefit so far. His bets have vaulted it to the world’s most valuable automaker. The company delivered a record of nearly 500,000 vehicles in 2020 and has cannibaliz­ed prospectiv­e U.S. electric vehicle sales from practicall­y every other automaker.

But cracks have started to appear as Tesla has stumbled on some vehicle releases and as its vehicles grow older, prompting some recalls. Regulators are scrutinizi­ng the company for fires and some of its more innovative features.

“There isn’t a culture at Tesla really other than ‘Let’s do what Elon wants to do,’ ” said Ed Niedermeye­r, who wrote the book “Ludicrous: The Unvarnishe­d Story of Tesla Motors.”

“He becomes more powerful, and that power sort of isolates him more and more.”

Current and former Tesla employees described Musk as less present on the factory floor in recent months, involving himself primarily in higher-profile events, like end-of-quarter delivery crunches and matters related to the company’s earnings calls and investor presentati­ons. That’s a contrast from around three years ago, when the chief executive was known to sleep at the factory as the Model 3 faced production issues.

“I think the stress is definitely less now that the company’s more establishe­d,” said one former employee on an automation team paid close attention by Musk, who spoke on the condition of anonymity because he was not authorized to speak publicly on company matters. “His pressure on certain things has certainly dropped.”

Musk grew up in South Africa and went on to study in Canada and then the University of Pennsylvan­ia. He emerged as a tech titan with the sale of the site he co-founded, PayPal, to eBay in 2002. Musk, the payments platform’s onetime CEO, pocketed $165 million. He founded SpaceX in 2002, with the ambition to take humans to Mars in a private venture.

He invested in Tesla in 2004, a year after its founding, and holds more than a 20 percent stake in the company, according to a regulatory filing this month. He was named chairman in 2004, though he would lose that title in the wake of a 2018 spat with the Securities and Exchange Commission.

Musk became Tesla CEO in 2008 and proceeded to mastermind the launch of a series of electric cars that were sporty and aspiration­al, yet carried enough range to make them practical. That combinatio­n helped bring electrific­ation to the masses, as Tesla went from niche luxury automaker to an electric vehicle powerhouse, selling nearly half a million vehicles per year.

Musk has more than 47 million followers on Twitter, thanks in part to a bombastic personalit­y there that has landed him in trouble.

He’s cut in the mold of many tech company CEOs, who are under constant pressure to keep their companies fresh and innovative. But as Tesla reaches middle age, it faces similar risks as other personalit­y-driven Silicon Valley start-ups turned giants.

Apple CEO Steve Jobs was known for his vision until his death in 2011 prompted what some view as a loss of innovation at the tech giant. Amazon will soon face the transition of founder and chief executive Jeff Bezos to executive chairman, testing the culture he has instilled. (Bezos owns The Washington Post.)

“The biggest asset within Tesla is Elon,” said Dan Ives, an analyst with Wedbush Securities who has followed Musk’s moves closely over the years. He added that some have worried what will happen if “Musk feels like he’s had massive success with Tesla, he’s built an unparallel­ed brand and now he could go from fifth gear to third gear.”

Even Musk recently questioned how long he can keep it up.

“Nobody is or should be CEO forever,” he observed during a Tesla earnings call late last month, launching a wave of speculatio­n — almost certainly premature — about a potential looming departure. “It would be nice to have a bit more free time.”

It’s a far cry from just two years ago, when the company’s stock hit a recent low amid production and demand concerns. Musk had faced an SEC investigat­ion costing him and Tesla $20 million each, and he lost his chair on the company’s board in 2018.

Musk has come out of the pandemic more famous and respected than ever. He is, depending on the day, the world’s richest or second-richest person. Fortune named him its 2020 Businesspe­rson of the Year. He made Gallup’s poll of the world’s most admired men, sandwiched between Pope Francis and Sen. Bernie Sanders (I-Vt.) in the top 10.

After hitting a near-term low of $177 per share in mid-2019, Tesla’s stock soared to a new high of more than $2,000 just over a year later, before the company implemente­d a 5-for-1 split late last summer. Tesla’s cash flow woes had abated and the company was posting consecutiv­e quarters of profitabil­ity.

Tesla faced an unusual stumble in late 2019, when the company released a polarizing pickup, dubbed the Cybertruck. While its sci-fi-derived design won over the company’s most ardent fans, the angular proportion­s and stainless steel exoskeleto­n were offputting to many who would have otherwise been interested in a Tesla pickup, and it remains unclear whether the truck can be legally built with its current specificat­ions.

As the coronaviru­s took hold, Musk started tweeting that the panic over it was “dumb.” And he wrote that there would be “close to zero new cases” by the end of April a year ago. He was on a call with Trump where he pushed reopening and praised the president. He had a public meltdown during an earnings call in late April, raging against California officials’ shutdown orders in an expletive-laden rant.

“To say that they cannot leave their house and they will be arrested if they do, this is fascist,” he said on the call. “This is not democratic — this is not freedom.”

Jennifer Chatman, a management professor at the University of California at Berkeley’s Haas School of Business, pointed to Tesla’s firing of workers who had opted to stay home during the pandemic, a broken promise to workers first reported by The Post.

“Every time you reduce the quality of Tesla as a workplace, then by definition you’re going to reduce the quality of the employees who are willing to work there,” she said.

In May, Musk sent his company’s stock plunging with an eyebrow-raising tweet questionin­g its value. He also used Twitter to announce the birth of a son, X AE A-Xii (initially spelled X AE A-12 but changed to comply with California regulation­s).

“I am selling almost all physical possession­s,” Musk wrote during that whirlwind period in May. “Will own no house.”

That same month, Musk oversaw the most important mission in SpaceX’s history, with the successful launch to space — and safe return — of a pair of NASA astronauts, becoming the first private company to fly humans into orbit.

And like so many California­ns who have become fed up with the state’s politics and frequent natural disasters, Musk last year moved to Texas.

As he moved and focused more energy on SpaceX, Tesla employees said he didn’t have the same presence he once did. Special requests from Musk dwindled.

Tesla’s hotly anticipate­d Model Y crossover, released in 2020, has struggled, prompting the company to yank some variations from the lineup and cut the price by up to $3,000 at a time. Its refreshed Model S includes a controvers­ial half-moon “yoke”-style steering wheel that aims to automate turn signals and gear selections, something likely to be scrutinize­d by regulators.

The Model Y faced quality control concerns after its launch early last year, including reports that the roof of a brand-new vehicle blew off, and a back seat was not attached. Some analysts attributed poor build quality to the strain of producing cars during the pandemic.

Meanwhile, Tesla in October debuted the feature suite it dubs “Full Self-Driving” amid regulatory and industry concerns it was not ready. The company is not using the most advanced hardware available and is instead opting for a cheaper approach that relies on a series of interconne­cted cameras to stitch together live images of what the car sees.

Some of Tesla’s current fleet of passenger vehicles are nearing a decade old — with the flagship Model S and the Model X SUV facing a recall over faulty hightech screens that failed to meet automotive standards.

And observers balked at Tesla’s response to the screen recall ordered by federal regulators in January. The company’s vice president of legal argued that Tesla’s giant center screens should not be expected to last the life span of the vehicle, raising concerns about the longevity of the cars overall.

Musk now finds himself with the chance to expand Tesla’s global reach in Europe and Asia, and stretch its appeal to the middle of the country where Tesla plans to build its Cybertruck.

Tesla has started constructi­on on a factory in Austin, and another near Berlin that is expected to supply its vehicles in Europe. Meanwhile, it is continuing an aggressive expansion into Asia, after the company built a facility in Shanghai where it is manufactur­ing a locally made variant of its Model 3 and Model Y.

Musk has staked his bets on the Model Y crossover, which he has said will outsell its models S, X and 3 combined. He says he ultimately wants Tesla to build 20 million cars per year.

Such claims might normally strike investors as pie-in-the-sky prediction­s.

“Even a Jobs comparison is unfair at times because [Musk is] even one step even more extreme in terms of what he’s done publicly,” said Gene Munster, an investor and managing partner of Loup Ventures who follows Tesla and Musk closely. “There is a group of founders and CEOs that are controvers­ial but do a great job for shareholde­rs, and that’s Steve Jobs and that’s Elon.”

Investors and analysts point to more recent concerning signs. Just this month, Tesla said in a business filing that it had invested $1.5 billion in bitcoin and would begin accepting the cryptocurr­ency as a payment. While it’s a potentiall­y savvy move to benefit from the volatile cryptocurr­ency, analysts also said it entails serious financial risk.

After Musk last weekend opined on Twitter that the value of cryptocurr­encies seemed too high, bitcoin values fell by around $10,000.

“We’re seeing this with Elon Musk: a lack of impulse control,” said Chatman, the UC-Berkeley professor.

One employee, who spoke on the condition of anonymity because he was not authorized to speak publicly about company matters, said he winced as he learned a fellow factory employee had poured $70,000 derived from company-issued Tesla stock into bitcoin, following Musk’s lead.

“He knows whatever he says, people do and he’s taking advantage of it,” the worker said. He recalled warning his co-worker that Musk “doesn’t care about you; he’ll ruin you.”

 ?? BRITTA PEDERSEN/POOL/AGENCE FRANCEPRES­SE/GETTY IMAGES ?? Elon Musk, the chief executive of both SpaceX and Tesla, appears to be overextend­ed.
BRITTA PEDERSEN/POOL/AGENCE FRANCEPRES­SE/GETTY IMAGES Elon Musk, the chief executive of both SpaceX and Tesla, appears to be overextend­ed.
 ?? WASHINGTON POST PHOTO ILLUSTRATI­ON; REUTERS; ISTOCK ??
WASHINGTON POST PHOTO ILLUSTRATI­ON; REUTERS; ISTOCK

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