Basically, the only real problem with the delays is the fact that these vehicles have already been sold. If there were no pre-sales, and the ship date slipped a year, no big whoop. However, I think the people who have already put money down realize the risks involved here. Also, the large number of celebrities and other notable people who are amoungst the pre-orders (both founders of Google, the Governator, Matt Damon, George Clooney, will.i.am from the Black Eyed Peas, and Flea from the Red Hot Chilli Peppers are just a few) pretty much means that the cars will be delevered eventually.

Crossing the chasm from a concept to a reality is proving more challenging than they anticipated, or expected.

Tesla’s constant reference to being superior to “mainstream” automotive folks might have made them different, but also showed a certain “naivete” on their part.

On the one hand, I love the idea, and can see there would be a demand. The promised performance alone is enough to make me WANT one, something I can’t honestly any electric car has ever done before.

But what troubles me so much about the Roadster project is that none of the big boys share Tesla’s “vision”, and undertake one of their own.

There’s really nothing that original about the Roadster: it’s fast (Elise), light, (Elise), well built and engineered (Lotus) and desirable (Lotus Elise). Tesla is consequently a battery company as far as I’m concerned, the rest of the hard graft was pretty much already there. So the question is, why will Tesla break new ground in battery technology where no-one else can?

If I had to guess, I suspect the Tesla will make it to market in much of the promised format, yet be plagued by reliability problems. Such a hi-tech car is asking for it. That really underlines the crucial difference between an SV start-up and a manufacturer like Toyota – the latter would not put such a risky car on sale.

The problems are almost certainly the little matter of going from the idea/prototype stage to a real world product. Silicon valley lives on hype and promises and has a long history of making buggy products with limited lifespans. How many laptops computers or iPods do you think will still be working properly 5, 10 or 15 years after they were made????

In my experience, smaller companies have much higher rates of fraud and/or financial ineptitude than large publicly traded ones. You just don’t tend to read about them in the papers because when they immolate they don’t burn as big as does the odd multinational corporation that goes down in flames.

Small companies tend to lack adequate professional accounting support. Books are often prepared by over taxed and under qualified staff. As you point out, Tesla doesn’t list a CFO or VP-Finance.

People running smaller companies tend to be more emotionally tied to the results and are therefore more tempted to fudge the numbers. I’m sure the Tesla principals, who are working on a product that will “change the world,” are not immune to these enticements.

Plus, it’s easer for small businesses owners/leaders to gain inappropriate access to manipulating the financials. Unless the VCs are in the general ledger system (assuming the company has one) reviewing every journal entry, they can’t prevent this.

So I remain highly skeptical.

I have no doubt that they can get vehicle bodies and install batteries in them — that was never the problem. The issue is whether they build cars in sufficient volumes, that don’t require constant patching to be kept roadworthy, and whether they will have the charging and storage capability to be usable as promised.

This was Vector’s problem. They, too, had prototypes that were roadtested by the magazines and displayed at car shows. Much hype was created, and much drool produced by the enthusiast press. Some even put down deposits to buy them. But Vector was never able to deliver vehicles to paying customers who could keep those cars running.

And mind you, Vector was going to buy drivetrains from other companies. Tesla has to go one step further and make an unproven technology workable for its drivetrain. A big, big step.

This is all true — in a big public company. The Board/management dynamic is vastly different in a cash-strapped startup company. There, the finance department is basically the CFO and a controller — and I’d note that Tesla’s own website doesn’t even list a CFO or VP-Finance (http://www.teslamotors.com/media/company_team.php). The Board in a VC-funded startup is much more closely involved in the day-to-day management of the company, and there isn’t much chance for the finance folks (who are often serving quadruple duty as the heads of HR, Legal, and even operations) to do more than slap the numbers together into something presentable. Sure the new CEO will want to know what’s going on. Sure he/she will CYA. But I’d be willing to bet that the VC’s already know what has happened moneywise.

VXC’s take massive risks on companies with unproven products, based mostly on the potential of those products and the integrity and ability o the management team (or the ability of the existing team to recruit and bring in their own replacements). This is a routine transition in the VC world, happens all the time. It does not mean the company is going under, it just means that either (i) they always knew Eberhard wasn’t their CEO but wanted to fund before someone else got in, or (ii) they took Eberhard for the equivalent of a 24 hour test drive and found him wanting.

I do agree that this is only the beginning of the story and it bears close watching. If Eberhard really screwed things up, he’ll be gone. And there’s even a small chance that he is gone already in the sense that his end date was set, that this is the first step in his transition out. But it feels more like the classic situation where the techie CEO gets demoted back to somewhere where his techie skills are better served.

That doesn’t mean that we always must choose sensible cars. There are lots of light weight overpowered cars out there that you wish you’d never crash in. But Tesla makes little sense to me because it tries to go fast as lightning with electricity, in a time when an energy crunch is coming, and while the only energy storage solution are volatile, small lithium ion batteries.

Taking a wild guess, and knowing what I do know about such batteries, I think they’re finding out it’s a bomb waiting to happen. I’m also guessing that’s why Toyota shelved the same approach.

So – add it up: lightweight, fast car — with a battery platform that is potentially unstable — and with an expensive battery back that will go from 100% capacity to 45% capacity in under a year … Are Tesla Motors customers oblivious enough? We’ll find out.

Maybe, maybe not. In VC deals, founders are often displaced by the venture capitalists — it happens more often than not. Keeping someone like Eberhard at the helm would have been the exception, not the rule.

It’s possible that getting rid of Eberhard was always the plan, and that Eberhard has known this for a long time. He may have been kept in that seat for this long in order to dazzle media pundits and would-be customers with tech jargon and dreamspeak, something that he would be good and earnest with as a founder.

At this point, the hype has been generated and it’s time to get down to the business of making cars. I’m still not convinced that Tesla is ready to do that, but I’m pretty well convinced that Eberhard was never the guy who was going to do that. I still think that it’s probably vaporware, but a tech geek like Eberhard would need to go, regardless.

All the more reason for a changing-of-the-guard audit.

They run the Board, get monthly financial and other reports which they then poke and prod at meetings (and outside meetings).

By the time any Board of Directors or investors see financial reports, they have gone through multiple consolidations and have been polished by accountants and financial controllers (like myself). This summarization process creates opportunity for the inept or unethical to distort what is really happening.

They probably get audited annual financials and so on.

Even if they are subject to annual reviews by reputed accounting firms, that’s no guarantee. Shall we name some infamous companies that were also being audited annually? Enron and WorldCom quickly come to mind.

There won’t be an audit because unless Eberhard and his CFO are outrigth defrauding them, the investors know at every step how much money is being put where.

The investors only know what they are told by the accountants and finance gurus. How would they know if there was “outright defrauding” without an independent financial review? If financial malfeasance were obvious it wouldn’t be fraud, it would be simple theft.

Besides, audits aren’t just for fraud. They can also uncover negligence, mismanagement, inefficiencies, accounting errors, and other business risks.

This is a simple management transition

There’s no such thing. The new CEO is assuming fiduciary responsibility for the company. In addition to the ethical/moral implications of this, he has a legal duty as trustee of the company. No CEO want’s to go to jail for something his predecessor did because he/she was too stupid to authorize an audit when assuming control as chief executive.

unlike in many companies it appears that Eberhard will actually get to stay on at Tesla.

CUC International CEO, E. Kirk Shelton, was kept on by Cendant Corporation after the two companies merged in 1998. In fact, he was contractually slated to take over as CEO of the merged company after a year or two. Fortunately, he was not retained long enough to every take on that mantle. During a post-acquisition financial review, auditors discovered that Shelton had overstated CUC revenue by half a billion dollars over the three years prior to the acquisition. By the way, CUC’s external auditors, who conducted annual reviews, and Cendant’s Due Diligence team missed this little bitty error. If there are financial irregularities, Eberhard’s continued employment at Tesla might only be as permanent as Shelton’s at Cendant.

Eberhard got bumped because investors lost confidence in his ability to manage the company. There’s a reason for this. The new CEO will order a financial review to protect himself and prove that he has all of his ducks in a row. If Eberhard’s operational ineptitude extends into financial mismanagement or fraud, we’ll be hearing about that in a few months. If not, we’ll probably hear nothing and he’ll stay put.

Stay tuned – that’s all I’m trying to say.

Seriously though, I hope that Tesla Motors makes it. Unfortunately, I’m not so sure. I became a skeptic when they announced their second electric car (a mainstream sedan) before the first was even delivered.

Still, I see no reason to believe there won’t eventually be a roadgoing Tesla Roadster. Its not just a bunch of Silicon Valley techs and hedge funds running this operation. Lotus is heavily involved as well.

BMW were realistic, years ago, when they looked into electric power for their cars. To meet BMW driving expectations, they realized they would need to use capacitor charging, in order to have substantial juice available for acceleration, while still delivering the kind of power required to move a SAFE vehicle up to BMW standards.

They never solved the problem of how to recharge the capacitors in a viable manner, in order to achieve adequate range.
Just being able to out-accelerate someone once doesn’t cut it, if it means you just emptied your energy reservoir.

Tesla is trying to do it by achieving satisfactory acceleration in what can only be termed as an UNSAFE vehicle, given the physics of the beast. The name ROADSTER does apply, and we are (of course) at liberty to drive any damn thing we please, as long as it can be certified for the roads. But the Tesla company are slowly being forced to renege on their original spectacular claims, as real world physics and safety concerns intrude upon the initial wishful spec’s.

And that battery pack, consisting of thousands of lithium-ion small cells? Don’t get me started.

In a large corporation, that might be true. In a corporation in which the management of production is not so critical to the quality of the product, that would also be true.

But in a startup company assembling something as complex as a car, I would expect the chairman to be well familiar with operations. Without that intimate knowledge, costs can spiral out of control, quality problems may go unaddressed and critical decisions about how to source or build the parts needed might be handled inadequately.

Small businesses require managers who are extremely knowledgeable of the day-to-day workings of the business. As the business grows, that can be delegated downward, but at this stage of Tesla’s life, the chairman had better know how these components of the business fit together. In this case, the complexity of the product requires operational knowledge, as these present plenty of opportunity for critical errors. Building a car is a lot tougher than assembling a computer.

I suspect that he might be a typical engineer: poor delegator that can’t let go of his project. He was probably not good at ceding operations control (getting the hell out of the way) so they gave him the boot.

http://www.moller.com/files/M200_Production_starts.pdf

So it’s possible that this handover may not be such a big deal. They may have kept Eberhard in the driver’s seat (no pun intended) as long as they have in order to have a good spiritual face for the company — up to now, they’ve been selling a dream, so that’s most important. If the car is actually going to get built, they’d need someone with more manufacturing knowledge to get the job done.

Still, something doesn’t quite smell right, and I’m with Mr. Farago that delays have been an issue here. Eberhard’s background is in technology, a field which is notorious for creating hype in advance of product releases, only to release those products before they are completely ready so that the initial buyers effectively serve as paying beta testers of the earliest release. The problem here is that you can’t do that with cars, and I hope that these tech guys realize that this thing better be pretty solid before it ends up in the hands of paying customers. (Refer to Andre Agassi’s brief experience with owning a Vector as an example of what not to do.)