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‘Chaos’ at Tesla as Work Force Shrinks 9%, SolarCity Outlets Close, and Whistle-Blower Weighs In

Hot on the heels of its decision last week to downsize its work force by 9%, Tesla Inc. is closing about a dozen solar installation facilities in nine states and ending a retail partnership with Home Depot that accounted for about half of its solar sales, Reuters revealed in an exclusive report Thursday.

The cuts hit the Tesla division formerly known as SolarCity, a solar panel sales and installation business previously owned by two cousins of Tesla CEO Elon Musk, and where Musk served as board chair. “The operational closures, which have not been previously reported, raise new questions about the viability of cash-strapped Tesla’s solar business and Musk’s rationale for a merger he once called a ‘no brainer’—but some investors have panned as a bailout of an affiliated firm at the expense of Tesla shareholders.”

The solar closures will hit operations in in Arizona, California, Connecticut, Delaware, Maryland, New Hampshire, New Jersey, New York, and Texas, plus dozens of staff in call centres in Utah and Nevada. After reviewing an internal company list, Reuters says about 60 installation facilities will stay in operation.

Ending the Home Depot partnership pulls Tesla’s products out of 800 retail outlets across the U.S., but the company said the decision was part of its “larger effort to absorb SolarCity into its high-end brand and sell through 90 of its 109 U.S. retail stores and its website,” Reuters writes. “Tesla stores have some of the highest foot traffic of any retail space in the country,” the company declared.

But analysts weren’t so sure. “In effect, they seem to be saying, ‘We have no strategy for selling solar,’” said Frank Gillett of Forrester Research, adding that the SolarCity deal “looks pretty awful right now.”

Reuters says the company’s solar sales are down dramatically in the first three months of this year from more than 200 MW per quarter in early 2016. That trajectory could jeopardize a joint venture with Panasonic and put Tesla in default on an agreement to spend US$5 billion in New York state within 10 years. “If Tesla fails to meet that obligation and others, the company may be required to pay tens of millions of dollars in penalties at various milestones, could lose its lease, or be forced to write down the assets, the company told investors in a May filing.”

The “difficult but necessary” mass layoffs from Tesla’s Fremont, California electric vehicle factory, meanwhile, “offer a glimpse of the surging pressure the company is facing to keep up with the ambitious goals Musk has set. Factory workers say they’re being pushed to ramp up work even as their co-workers are being pushed out the door,” the Washington Post reports.

“Though Tesla has said it wants ‘to be the safest factory on Earth,’ three factory workers told The Post that they worried the accelerated Model 3 demands could compromise the cars’ safety and lead to more injuries and worker burnout,” the paper adds.

“We’re a NASCAR pit crew,” said one employee. “We’re doing this at the speed of light.”

In the continuing bid to pull itself out of the “production hell” that has plagued its Model 3 sedan production line, Tesla trying what the Post calls the “unconventional alternative” of building an additional assembly line, literally out of scrap, in an outdoor tent. On Twitter, Musk congratulated staff for getting the “pretty sweet” new production facility in place in three weeks, with “minimal resources”. The Post says Fremont, California building permits “show the open-air structure is temporarily approved for up to six months, and show that fire sprinklers and other building features have been deferred.”

More broadly, employees assert the company “is facing more chaos at the factory than its drivers and investors may understand,” the paper reports. “And Musk, in recent all-employee emails, said the company suffered setbacks from a factory fire and an internal saboteur.”

“I was dismayed to learn this weekend about a Tesla employee who had conducted quite extensive and damaging sabotage to our operations,” he wrote. “This included making direct code changes to the Tesla Manufacturing Operating System under false usernames and exporting large amounts of highly sensitive Tesla data to unknown third parties.”

He added that, “as you know, there are a long list of organizations that want Tesla to die,” including “Wall Street short-sellers, who have already lost billions of dollars and stand to lose a lot more,” and fossil companies that “don’t love the idea of Tesla advancing progress of solar power & electric cars.” As far as other auto companies, Musk wrote, “if they’re willing to cheat so much about emissions, maybe they’re willing to cheat in other ways?”

While Musk “has long advanced a viewpoint of Tesla-against-the-world,” write Post reporters Drew Harwell and Danielle Paquette, his “latest wave of conspiracy thinking—coming within days of similar attacks on labour unions and journalists—has surprised even long-time Tesla watchers.”

“He’s always been combative,” said Gartner automotive research director Mike Ramsey. But “the public displays of paranoia have become increasingly odd. To me, they seem to reflect a level of anxiety or pressure that I haven’t seen recently.”

By late last week, ex-Tesla employee Martin Tripp had emerged as Musk’s alleged saboteur, and was telling the Post that he was actually a whistle-blower going public after seeing “some really scary things” within the company, including dangerously punctured batteries installed in hundreds of Model 3s.

“Tesla attorneys wrote in their lawsuit that Tripp, a former technician at the company’s Gigafactory battery plant in Nevada, wrote software to aid in an elaborate theft of confidential photos and video of Tesla’s manufacturing systems,” the Post writes. “The firm’s attorneys said Tripp worked at Tesla from October to last week, when company investigators confronted him with evidence.”

The lawyers maintained that Tripp fed false information to reporters, including the claim about defective Model 3 batteries. Tripp confirmed he’d been the source of a Business Insider story on Tesla’s raw material waste, but said he’d gone public “because he was alarmed by what he learned while an employee, including what he claimed were hundreds of Model 3s that had punctured batteries,” the Post writes. “Tesla representatives have said they would not ship cars that have safety concerns.”