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Did Elon Musk Mislead Fox About Problems At Tesla?
Silicon Beat ^ | September 27, 2012 | Chris O'Brian

Posted on 09/29/2012 12:15:31 AM PDT by Cincinatus' Wife

A couple of weeks ago, Fox Business anchor Liz Claman made her annual visit to Silicon Valley to interview local CEOs. One of the exclusives she scored was an interview with Tesla co-founder Elon Musk.

In listening to that interview, it would be easy to conclude that everything at Tesla was hunky dory. In fact, better than that. Musk said they were doubling production from 40 to 80 cars per week. That they were hiring like crazy. And he even discussed the growing short position on Tesla and its stock, insisting:

“It’s doing pretty well actually given that we’re such a huge short position. In fact I think the short position may be as high as one can actually go. They literally hit the ceiling on the short position. The shorts are in it to the hills. I think it is very unwise to be shorting Tesla, it’s very unwise. There is a tsunami of hurt coming for the short.”

Tough talk. But it’s also an outlook that seems hard to square with revelations this week that Tesla has hit some serious bumps in the road. According to this story about a startling securities filing from Tesla, Dana Hull reports:

“Tesla Motors (TSLA) on Tuesday quietly cut its revenue forecast for 2012 and admitted that production of its all-electric Model S sedan is ‘slower than we had earlier anticipated.’ “

Of course, that news sent Tesla’s stock spiraling down this week, from $30.66 to $27.54 on Wednesday. (Though it’s recovered a bit Thursday). Still, it seems the shorts were right, and Musk was wrong.

But how could he be wrong? Did Musk not know, just two weeks ago that things at Tesla were getting seriously off track? Or did the problems not become clear until just this week, forcing the company to make the disclosure?

It’s hard to believe the problem just popped up. Hull writes:

“Tesla had previously vowed to make 5,000 cars by the end of this year. But in its latest filing with the Securities and Exchange Commission, it revealed it is “four to five weeks behind our previously announced Model S delivery goals” due to delays by suppliers and the need to continue to train employees. The company now says it expects to deliver 200 to 225 Model S vehicles to customers in the third quarter and 2,500 to 3,000 Model S vehicles in the fourth quarter.”

Musk didn’t address the 5,000 car goal in the interview, and Claman didn’t ask about it specifically. But the 80 cars per week that Musk referenced means that the company would be on track to build 960 cars in the last 12 weeks of the year. To hit the 2,500 mark, the company would have to more than double that rate to at least 200 cars per week.

Is that realistic? Actually, it’s even tougher than that. Because Tesla can’t get to 200 right away, it will have to produce many, many more more by the end of the quarter to hit that mark. Hull writes:

“It said it produced 77 cars in the week ending Sept. 23 but needs to ramp up to 400 cars per week before the end of 2012.”

To deal with the issue, the company said it is working with suppliers to get more timely deliveries of parts. It’s hiring like crazy, but of course, training takes time. And the company now says it will need to issue more stock to increase its cash cushion.

But perhaps the part that makes me the most nervous is that the company is having to renegotiate its payment schedule with the U.S. Department of Energy on its loan.

So, did Musk mislead Claman in that interview? His rosy view certainly seems at odds with what we now know. Perhaps, one could argue, she just didn’t ask the right, specific questions. Perhaps, he masterfully spun what was a deteriorating picture.

At the same time, the company made a big announcement this week about the Supercharger stations it was rolling out. And then very quietly the next day filed that document revealing its challenges with the U.S. Securities and Exchange Commission.

Whatever the case, I’m willing to bet there are a lot of shareholder lawyers out there sharpening their pens, and parsing his words very, very closely.

Here, by the way, is the clip:


TOPICS: Business/Economy; Culture/Society; Extended News; Government
KEYWORDS: cronycapitalism; economy; electriccar; green
Navigation: use the links below to view more comments.
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More on Musk

Tesla Motor electric cars

Solar City solar panels

Space X rocket

May 29, 2012 (Ricochet) Elon Musk Shows Us How to Thrive in the Government-Directed Economy ...."Those who know how to navigate an economy driven by the state will succeed. They do so regardless whether the market has determined their product as the best or not—sometimes it has, sometimes it hasn’t. Sometimes the consumer has no real ability, thanks to the aforementioned mix of laws and regulations, to go in another direction. Sometimes the only consumer is the government, meaning the appropriators, bureaucrats, and administrators who dream fondly of working some day for the contractor titans they fuel with other people’s money.".....

Sept 18, 2012 - Elon Musk SpaceX Head Obama Bundler?

April 15, 2012 (National Legal and Policy Center) Taxpayers Subsidize Forbes 'Green' Billionaires' Schemes........Musk, best known as co-founder of the company that became PayPal, is Chairman of SolarCity and CEO of Tesla. According to the Center for Responsive Politics, SolarCity spent $535,000 in 2009 and 2010 to lobby Congress and the Department of Energy on climate legislation, the Recovery Act, “green workforce training and development,” and provisions in various legislation “relevant to solar development.” SolarCity has sought to extend a program, due to expire at the end of 2012, that delivers to manufacturers an upfront cash grant in lieu of a 30 percent Investment Tax Credit (called the Section 1603 grant program). So far, according to DOE reports, SolarCity has received more than $66 million from that program.

The company also won a partial guarantee from DOE of a $344 million loan that will place up to 160,000 rooftop solar installations on military housing across the country..........."

1 posted on 09/29/2012 12:15:39 AM PDT by Cincinatus' Wife
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To: All

http://online.wsj.com/article/SB10000872396390444712904578024071333648886.html

[Sept 28, 2012] “Tesla Motors Inc said it plans sell as many as 8 million shares at about $28.25, raising as much as $225 million to avert a cash squeeze amid production delays.

The Palo Alto, Calif., electric-car maker earlier said it hoped to raise about $130 million by offering about 5 million shares after receiving a waiver on terms of a $465 million U.S. Department of Energy loan. The DOE on Monday agreed to delay a $14.6 million payment due next month to February and required the company to submit a plan by Oct. 31 that would repay the loan ahead of its 10-year schedule.

Investors cheered the vote of confidence shown by the larger than expected number of shares, boosting Tesla’s stock price 4% to $29.65 in Friday afternoon trading. Goldman Sachs GS -1.35% Group is handling the share sale.

Chief Executive Elon Musk agreed to buy up to 35,398 shares for about $1 million, the company said. Mr. Musk currently holds about 26% of the electric-car maker’s stock, according to FactSet Research.

There were 105.4 million shares outstanding as of July 16.

The offering is expected to close on Oct. 3.

Tesla began deliveries of its all-electric Model S sedan in June, a month ahead of schedule. But on Tuesday, Tesla cut its revenue target for 2012 by as much as $200 million, warning it has fallen behind on its Model S sedan, citing unspecified production problems. The car sells for between $50,000 and $98,000 after federal tax credit.........”


2 posted on 09/29/2012 12:24:35 AM PDT by Cincinatus' Wife
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To: All

Tesla Motors, the startup electric carmaker whose CEO, Elon Musk, also runs private space-exploration firm SpaceX, is having another one of its periodic financial near-heart attacks. The latest news is that the company, which staged a $226-million IPO in 2010, wants to sell additional stock. A second offering of more than 40 million shares would bring in close to $150 million.

Why? Yet another cash crunch for the company, which was pretty close to checking out in 2008, before Musk managed to find additional funding and do a deal with Daimler. The critical issue this time around involves the Department of Energy and it controversial loan program for greentech companies. Who can forget Solyndra? But electric cars are also a substantial part of the program, with both Tesla and Fisker Automotive — the two biggest names in alt.transportation — winning loans.

Solyndra was a disaster (although not flawed in its ambition — as I’ve argued, the DOE was acting as a “super venture capitalist,” attempting to create an entire sub-industry for solar, and besides, the loss was a small percentage of the overall portfolio). Tesla, on the other hand, has defied the naysayers.

That said, it’s interesting to learn from Tesla’s most recent SEC filing that the company is “dependent upon” its loan facility — $465 million, all of which the company has drawn down. Earlier this year, Musk said that it was the Daimler deal, not the DOE, that saved Tesla. But now it’s the DOE that Tesla is depending on.

And that’s where the problem comes because Tesla isn’t building or selling enough of its new luxury sedan, the Model S, to meet its obligations. The company’s September 25 8-K (a document it has to file with the SEC) is technical, so I’ve highlighted the parts that you need to pay attention to:...............”

[SNIP - link to that info below]

“...The bottom line is that Tesla needs money to keep pace with its payments to the DOE and expects to be able to raise said moolah with the second offering. But the hard reality is that the auto industry is a capital-intensive business for even the established automakers, who can burn through a billion a month to keep going. Tesla has to spend a lot less to stay in business, but as startups go, its burn rate — how fast it blows through cash — is impressive: The company has lost over $850 million since being founded in 2003...............”

http://www.scpr.org/blogs/economy/2012/09/28/10225/tesla-motors-running-out-money-again/


3 posted on 09/29/2012 12:33:17 AM PDT by Cincinatus' Wife
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To: Cincinatus' Wife
The company also won a partial guarantee from DOE...

The new US business model now resembles Soviet factory quotas of the 1950's. The electric car that nobody wants is our version of 3 million left shoes.
4 posted on 09/29/2012 12:33:35 AM PDT by SpaceBar
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To: Cincinatus' Wife

Who is the CA Republican RHINO that pushed for TESLA?

I think his last name is Cambell.


5 posted on 09/29/2012 12:38:21 AM PDT by ChiMark (chewed up his body for a decade)
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To: Cincinatus' Wife
Add to the list LG batteries in Holland Michigan, they have started “rolling furlows” for their employees.
6 posted on 09/29/2012 12:40:04 AM PDT by exnavy (The time is upon us, fish or cut bait, may God guide your heart.)
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To: SpaceBar

Tesla’s Fast Chargers Could Be a Financial Liability

Last night Elon Musk announced that Tesla has built six fast charging stations in California that are now available to owners of the Tesla Model S—at least the higher-end models. Tesla will allow drivers to charge for free. The chargers will allow drivers to add 150-miles worth of energy to their batteries in about 30 minutes. Charging at ordinary public charging stations takes hours.

In anticipation of the announcement, we considered whether fast charging can make a difference for electric vehicle adoption. See “Will Fast Charging Make Electric Vehicles Practical?” One concern with fast chargers is whether they make economic sense. In the case of Tesla, the stations won’t bring in any revenue directly, since Model S owners won’t have to pay to use them and no one else—not even Tesla Roadster owners—will be able to plug in to the proprietary system. Musk expects the system will make the Model S more attractive for customers, so the stations will essentially, from a business perspective, serve as a sales and marketing tool.

There’s a chance that the stations will be a substantial financial liability for Tesla, which today announced that it needs to raise more money to keep operating. Tesla claims that they will cost almost nothing to operate, since the power will come from solar panels. What’s not clear is whether that solar power is stored on-site in batteries, or whether it’s simply fed into the grid. (Tesla hasn’t yet responded to an request for this information.) If there are batteries, Tesla can avoid substantial demand charges from the utilities, since the chargers won’t need to draw large amounts of power directly from the grid. (The solar arrays don’t appear to be large enough to supply the 100 kilowatts the chargers draw—and even if they were, there would need to be another source of power at night or on cloudy days.) Without a battery, Tesla will almost certainly need to pay the fee, which will be a continual drain on the coffers of the cash-strapped company.

UPDATE: Tesla says that two of the six stations “are being set up to receive a stationary battery” that would allow them to avoid “any excessive demand charge.” The cost for each station, which will charge between 4 to 6 cars, ranges from $100,000 to $250,000.

http://www.technologyreview.com/view/429348/teslas-fast-chargers-could-be-a-financial/

______________________________

“.......on the Tesla Motor Club forum, Musk previously said the Tesla connector can deliver up to 90 kilowatts to the vehicle - twice as much power as what would ordinarily be considered a fast charge.

“At 90 kilowatts, you’re recharging about 100 miles of range every 20 minutes,” Musk said in the video. “If you’re traveling between cities, you don’t have to stop for very long in order to recharge enough range to go to the next leg of your journey.”

Tesla says the Model S was designed with supercharging in mind, and that frequent supercharging should not degrade the battery.

The Model S is available with three battery pack options that offer roughly 160, 230 or 300 miles per charge. All Model S vehicles equipped with the 300-mile battery or the 230-mile battery will be able to use Superchargers, but those equipped with the 160-mile battery will not.....”

http://www.dailybreeze.com/business/ci_21630727/tesla-motors-unveils-superchargers-hawthorne?source=rss


7 posted on 09/29/2012 12:50:33 AM PDT by Cincinatus' Wife
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To: Cincinatus' Wife
Tesla, which today announced that it needs to raise more money to keep operating. Tesla claims that they will cost almost nothing to operate, since the power will come from solar panels...

This should be called "bonghit economics".
8 posted on 09/29/2012 1:01:49 AM PDT by SpaceBar
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To: All

“All Model S vehicles equipped with the 300-mile battery or the 230-mile battery will be able to use Superchargers, but those equipped with the 160-mile battery will not.....”

http://www.dailybreeze.com/business/ci_21630727/tesla-motors-unveils-superchargers-hawthorne?source=rss

Supercharge NOT available for 160 battery [starting price: $49,900]

Supercharge OPTIONAL for 230 battery [starting price: $59,900]

Supercharge INCLUDED [6 super-recharge stations in CA to date] for 300 battery [starting price: $87,900 - $97,900]

http://www.teslamotors.com/models/options


9 posted on 09/29/2012 1:04:09 AM PDT by Cincinatus' Wife
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To: SpaceBar

More “bonghit economics” in Post 9.


10 posted on 09/29/2012 1:05:30 AM PDT by Cincinatus' Wife
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To: ChiMark; exnavy

“..........what Musk forgot to mention during his grand gala presentation announcing the charging station network is that it will only work with Tesla-made vehicles. In other words, if you buy an electric car but it doesn’t use Tesla’s standard plug-in (patented, by the way), then you’re S.O.L. using their network to drive freely across the nation. So if you can’t afford a $60,000+ electric sedan..

To paraphrase the Soup Nazi.. NO CHARGE FOR YOU!

To compare this to what we’re all used to, this would be like installing gas pumps that only allow a car with a filling port on the left side to use them. Worse, though, if the car’s filling hole is not at least 2.87 inches wide, your spigot won’t fit in it either.

On the other hand, this move by Tesla is much like how Apple took over the smart phone market. While Blackberry was the first readily-adopted smart phone, Apple came out with one that was prettier and had much better marketing. Even though it was expensive, could only be used with stuff they would sell you at a premium, and slower.. it had better salesmen and so it became the most prominent smart phone on the market while its competition slowly dies a cold death in Canada.

Except.. There’s a huge difference between a $500 phone and a $60,000 car.

Oh, and another thing.. all that fast charging Elon was touting the other night? It plays hell with battery life expectancies. It’s gonna suck when that expensive sedan becomes a brick a lot sooner than you’d expected..”

http://www.torquenews.com/1080/bursting-teslas-charging-station-bubble


11 posted on 09/29/2012 1:11:04 AM PDT by Cincinatus' Wife
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To: Cincinatus' Wife

.

Tesla should relocate to Fort Jackson:

- Tank Hill -

.


12 posted on 09/29/2012 1:20:01 AM PDT by devolve (----- ------- ------------c.1000_and_c.1620-------- ----------------------------)
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To: Cincinatus' Wife

Sounds like it would be more realistic to just have every vehicle tow a trailer planted with sod so the magic unicorns can graze. To fill up, you just pull over, collect some of the droppings, drop them into the tank, and off you go.


13 posted on 09/29/2012 1:22:13 AM PDT by SpaceBar
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To: SpaceBar; devolve

Obama, John P. Holdren [White House Science and Technology Czar] the EPA and the Dept of Energy are suing, regulating, blocking, shutting down and in every way possible, working to de-devolve [cripple] the U.S. economy. By hamstringing fossil fuel [cheap, available energy] they believe costs will rise and GREEN technology will become competitive — meanwhile free market capitalism goes down the tubes.


14 posted on 09/29/2012 1:34:02 AM PDT by Cincinatus' Wife
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To: Cincinatus' Wife
frequent supercharging should not degrade the battery

SHOULD. The most useful word in battery technology.

Let me give it a try on another manufacturer's product to illustrate.

"The Nissan Leaf batteries SHOULD have no troubles in hot climates."

Wow! That was easy. But the dummies at Nissan said that a battery pack WILL keep as much as 80 percent of its capacity after ten years. Never use the word "WILL" when talking about batteries. It's "SHOULD."

15 posted on 09/29/2012 1:42:36 AM PDT by Right Wing Assault (Dick Obama is more inexperienced now than he was before he was elected.)
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To: Right Wing Assault

Great catch!

More on Musk and crony capitalism:

....”On whether the presidential election will impact Tesla:

“No I don’t think it would make much difference actually. Obviously, President Obama is much more supportive of sustainable energy and electric cars and that kind of thing, but it’s worth noting that the Department of Energy program, Advanced Technology Vehicle Manufacturing program, which is what Tesla won the award for, was signed into law by President Bush and at this point we’ve fully drawn down the loan so I don’t know what Romney would do if he really hated us, which I don’t think he really hates us. I think he is a little too fond of oil.”.....

http://www.siliconbeat.com/2012/09/13/video-elon-musk-tells-fox-business-that-tsunami-of-hurt-coming-for-those-shorting-tesla/


16 posted on 09/29/2012 1:52:40 AM PDT by Cincinatus' Wife
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To: Cincinatus' Wife
But perhaps the part that makes me the most nervous is that the company is having to renegotiate its payment schedule with the U.S. Department of Energy on its loan.

Gee, who would ever expect that a business which depends on government loans to exist would be over-promising and under-performing? The liberal eco-fantasies about "green" energy sources and electric cars keep running up against the laws of physics and basic economics.
17 posted on 09/29/2012 1:53:42 AM PDT by AnotherUnixGeek
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To: AnotherUnixGeek

Exactly. Once this “free” taxpayer money dries up, deep pocket investors don’t materialize and the market never takes off, the taxpayer is left with paying off these federal “investments.” Yet our true energy engine - fossil fuel - is penalized by our government.


18 posted on 09/29/2012 2:01:40 AM PDT by Cincinatus' Wife
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To: Cincinatus' Wife

Liz Claman?

TTIWWP!


19 posted on 09/29/2012 2:14:40 AM PDT by mozarky2 (Ya never stand so tall as when ya stoop to stomp a statist!)
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To: Right Wing Assault

.

Even the Clowncar Chevy VOLT (it runs on coal generated electricity) costs multiples more (of subsidies) to manufacture than it can possibly ever sell for!

“Maybe I’ll buy a VOLT someday!” sez Obama.....

- Better hurry Barri - GM shut down the Chevy VOLT production lines!

.


20 posted on 09/29/2012 2:20:56 AM PDT by devolve (----- ------- ------------c.1000_and_c.1620-------- ----------------------------)
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