TTAC officially retired its Tesla Deathwatch series over a year ago, after the firm delivered its 100th Roadster. Indeed, we’ve generally turned away from the “Deathwatch” tag in recent months, as the bankruptcies of GM and Chrysler have removed the immediacy of many of their original criticisms. Over the years, the Deathwatch label has been a challenging mistress, often confusing readers as to TTAC’s intentions: though they were intended to document the slow-motion bellyflop of America’s automakers, they’ve often been interpreted as a sign that TTAC actually wishes tragedy upon the automakers it identifies as being in danger of shuffling off this mortal coil. Incidents like the one today, in which three Tesla employees were apparently killed when an light aircraft owned by Tesla senior electrical engineer Doug Bourn crashed into a Palo Alto neighborhood, serve as an important reminder that nothing could be further from the case. TTAC criticizes automakers because responsibly buying, owning and operating motor vehicles requires that consumers be well-armed with the facts. When real tragedy strikes the companies that build the vehicles we discuss here, our thoughts go out to the families of those lost, and we hope that the company’s operations soon return to some semblance of normality. Today we mourn for Tesla’s as-yet unidentified employees (apparently CEO Elon Musk was not on board) who will not be at work tomorrow, working on new ways to respond to criticisms and improve the firm’s products.

Yes, yes: I’m a Tesla naysayer. Have been right from the start when the media went ape shit for a car that hadn’t been built, repeating performance claims as if they were written on Moses’ stone tablets. (Which were eventually modified.) But I did take them off the “Tesla Birth Watch” when the car deliveries began. And we haven’t posted a “Tesla Death Watch” entry since May 1, 2009. If true, this report from TechCrunch—claiming profitability for the EV maker—indicates that we should cancel the TDW altogether. Cynic that I am, I see some pretty major caveats here. “Silicon Valley’s electric car company, Tesla Motors, says that it hit profitability in July. The private company reports that it made ‘approximately $1 million of earnings’ on revenues of $20 million, and that it shipped 109 Roadsters, its $109,000 all-electric sports car. The revenues reflect GAAP accounting standards and are only for the month of July.” Given that GM used a predicted (but not realized) Department of Energy (DOE) loan in their financial projections, does Tesla’s half billion dollar-or-so DOE suckle have anything to do with this?

In June, Tesla was also awarded a $465 million loan from the Department of Energy, which will help it manufacture its more reasonably priced Modern S sedan.

The $20 million in revenues and $1 million in profits do not reflect any proceeds from that loan, the company tells us.

And we believe them, right? [thanks to shabatski for the link]

And that’s just the prototype. The LA Times‘ Dan Neil (the automotive journalist’s automotive journalist) got an exclusive first up-close look at Tesla’s Model S and comes away with some healthy skepticism. What did he learn? “Tesla has already had to walk back a claim regarding the Model S’ recharge capacity. The car will not have the capacity to accept 440-volt current, which would allow it to be charged in 45 minutes,” for one thing. The prototype “is just barely ambulatory,” writes Neil. “More like a glorified golf cart than a harbinger of tomorrow tech.” Also, “the car’s signature design flourish—a 17-inch, touch-screen control panel with haptic feedback in the center console —may not even make it to production.” And Neil’s skepticism is contagious: The Business Insider concludes that “There’s No Way Tesla’s Model S Will Cost $57,400″ even after hefty government incentives. Ouch.

Now you may think that Tesla Motors, makers of the $109K+ lithium-ion powered Roadster, are acting in good faith re: taking deposits for their recently revealed Model S sedan. If so, GreenTech Media’s report that the Musk-scented company has secured 520 advance orders for the vehicle is a good thing: a sign of early adopters’ faith in Tesla’s ability to design, build and, eventually, sell the all-electric foor-door. Leaving aside Tesla’s past history of missing deadlines and changing announced specifications. With eyes wide shut, the fact that Tesla has collected $5K per car from 520 prospective customers, generating some $2.6M, is a good thing. Nothing wrong with raising a little—and in the car business $2.6 million is  microscopic—working capital. The fact that Tesla’s first model, the Roadster, isn’t profitable, and that the new money may be helping to prop-up THAT side of the business, is neither here nor there nor the subject of a court case. So . . . good news! There may be more money on Tesla’s table!

You can plunk down $5,000 for a regular Model S or 40,000 for a “Signature Edition,” which is supposed to come with some nifty features that Tesla has yet to disclose. The company plans to make 2,000 of the special edition cars – half of them for the U.S. market and the other half for Europe.

Figuring half of those 520 orders are for the we-won’t-tell-you-what-that-means “Signature Edition,” Tesla may have recapitalized off its true believers’ backs to the tune of $6.5 million. Still not much. But better.

And what if Tesla doesn’t receive a dime of federal financing and goes belly-up? Although Musk has publicly pledged to back up deposits with his personal fortune, our sources say there is no such language on the deposit contract.

That said, if Tesla would like to email a jpeg or pdf of same to robertfarago1@gmail.com, I’d be happy to put the document up here for TTAC’s Best and Brightest to see for themselves.

The racing biz has been trying to go green for nearly a decade now, realizing that sheer horsepower and derring-do don’t conform to the temper of the times. The new mantra: race on Sunday, save the planet on Monday (after breakfast on my yacht). So the idea of a one-make Tesla Roadster race series makes perfect sense: from a political point of view. As Tesla never met a trail balloon it couldn’t inflate with hot air, it’s no surprise that Tesla communictions manager Rachel Konrad gave the [we swear it's not an April fool's] idea her tacit support. “The Roadster’s acceleration certainly makes it competitive against other premium sports cars, so it’s not surprising that some customers are interested in competitions.” Yes, well, as Pistonheads points out, racing Roadsters would require a bit more development work. “However, there may be a few barriers to this new form of ‘green motorsport’. Continual hard driving may force the Tesla’s motor to overheat, causing a loss of power that wouldn’t make for very exciting racing. Races would also have to be kept to short sprint events, as a Le Mans-style 24-hour race would no doubt be made up of more battery charging than racing.” Oh, sure, NOW they piss on them . . .

Looks like we may have retired the Tesla Deathwatch a bit prematurely. Valleywag reports that Tesla CEO Elon Musk has launched a Nixonian “plumber” offensive aimed at eliminating leaks from the Silicon Valley startup. And boy are the employees happy about it. The plumb-and-purge strategy was launched when Tesla engineer Peng Zhou told Valleywag that the company’s cash reserves had dropped to $9M. According to the blog, Musk “hired an outside IT contractor go through the company’s email and instant messages, and then had an investigator take fingerprints off a printout discarded near a copier used to leak the email.” That investigation implicated Zhou who was asked to confess, apologize and leave the company. This was just the beginning.

The following memo was recently sent out to Tesla employees, and though it’s creepy enough in its own right, there’s more to the story. Apparently, Musk requested a Tesla IT employee to modify each copy of the memo (changing “I’m” to “I am”, etc.) in hopes of being able to identify a leaker. But because Musk kept the plumbing op close to his chest, even his executive team was unaware of the sneaky plan. Unaware of the purge, Tesla General Counsel, Craig Harding, forwarded his own copy, unwittingly revealing the plot and providing Tesla employees with a “safe” version of the memo to leak. Thus we can share the following creepiness with you without compromising any Tesla employees.

I’m a big believer in trusting employees and sharing information widely within the company, rather than confining it to a narrow set of senior execs and giving everyone else the mushroom treatment. Providing people with an understanding of what problems need to be overcome helps them align and prioritize their actions in pursuit of the greater good. It also ensures that all employees feel included and part of the same team.

This is why I’m so concerned about the continuing leaks to media. It really hurts free communication when even minor issues are leaked and blown way out of proportion. It is nutty that a company like Tesla, which is doing really well right now (how many companies can say that they’re sold out through October?) should suffer from misleading articles on blog sites that would have no credibility, but for a purported inside leak. The leaks often aren’t even accurate!

This kills trust and creates a negative atmosphere within Tesla. (ed: as opposed to convoluted plumb-and-purge operations?) It has to stop.

Today, the legal department will circulate a declaration form to all employees and contractors within the Bay Area. People will be asked to provide their word of honor and signature that they haven’t knowingly leaked any Tesla confidential information to the media. They’ll be reminded in clearly written language of the substantial liability they would incur for disclosure of confidential information in willful violation of the confidentiality agreement they signed with Tesla. If someone does not tell the full truth here, please take my word that you will be prosecuted to the fullest extent of the law.

Alternatively, people will be given the option of listing every leak they have made, whether published or not. If you fully disclose any leak you have done, the consequences will be precisely nothing. You will be completely forgiven and, unlike Peng, won’t be asked to publicly apologize to the company.

The actions of any one person can’t be allowed to hurt the vast majority of people at Tesla who are working incredibly hard to make a difference in the world.

Elon

Gawker reports that Tesla spinmeister Daryl Siry left the Silicon Valley startup because CEO Elon Musk (above) was pushing to accept deposits on the Model S sedan. The Model S (a.k.a. WhiteStar) exists only as a prototype. Tesla has no factory or financing with which to build it. When Musk announced that the DOE would approve Tesla’s loan application (they haven’t and likely won’t) and decided to accept $40K Model S deposits (next month), Siry smelled fraud and bailed. Valleywag calls Musk “The New Preston Tucker,” revealing that Musk told a recent Tesla “town hall” meeting that Tesla deposits were not guaranteed. This despite earlier assurances that Musk would personally guarantee deposits. With reports of Tesla asking for up to $75K in unescrowed “reservation payments,” and difficulty reclaiming deposits as small as $5K, Siry’s fears were probably well-founded. Meanwhile, anecdotal evidence from Tesla forums indicates that the real winner here: the Fisker Karma.

It can be so hard to tell when the firm’s CEO is so notoriously at odds with reality. So let’s just say that we’re entering Elon Musk’s world, grains of salt available upon request. In fact, the news comes from a Musk email that Jason Calcanis has posted verbatim to his blog (cross posted at Tesla Motors). The main point of the email seems to be to convince the reader that Tesla isn’t about to disappear with the credit market, citing a deal with Daimler to electrify the Smart, a $40m investment round and the near sellout of all 2009 Roadsters. Even better, if you lay out $100k for a Roadster now, you might just have a new cashflow opportunity to get you through the hard times. “Due to our order backlog, it seems that owning a Roadster can be a good investment,” writes Musk. “Last September, as the financial and real estate markets began crashing, a Roadster was sold at the Sonoma Paradiso in California wine country for $160,000, well above the current list price of $109,000.” And if you buy that, I’ve got some mortgage-backed structured invesment vehicles that you might be interested in. But the big news is that Tesla may or may not get funding from the biggest sucker of them all: the US Federal Government. Or not. (Hat Tip: minion444)

“I am excited to report that the Department of Energy informed Tesla last week that they may disburse funds from our $350M Model S loan application within four to five months,” writes Musk. May? Might? Could? Sorry Elon, but I like a little more specificity out of my conjugations. “The Obama administration has thankfully made it a top priority to move quickly on the Advanced Technology Vehicles Manufacturing loan program, as this will both generate high quality jobs in the near term and lay the groundwork for a better environment in the future. ” And again, nothing specific to Tesla there. I smell some trademark “reality issues.” Especially because there isn’t a peep yet from the DOE. Which begs the question: if Musk is fudging his verbs to imply loans are forthcoming when it’s no sure thing, how on earth is anyone supposed to believe his repeated insistence that Tesla is not in financial trouble?

Email to Tesla buyers:

“A much fuller account of the history of Tesla is worth telling at some point, but for now I will just talk about the essentials of why we needed to raise prices on options. Fundamentally, it boils down to taking the tough steps that are difficult but necessary for Tesla to be a healthy company and not fall prey to the recession.

When the initial base price, for cars after the Signature 100 series, of $92k was approved by the board a few years ago, it was based on an estimated vehicle cost of roughly $65k provided by management at the time. This turned out to be wrong by a very large margin.

An audit by one of the Series D investors in the summer of 2007 found that the true cost was closer to $140k, which was obviously an extremely alarming discovery and ultimately led to a near complete change in the makeup of the senior management team. Over the past 18 months, observers will note that Tesla has transformed from having a senior team with very little automotive experience to one with deep automotive bench strength. We now have executives with world class track records running everything from design to engineering to production to finance.

To bring the cost of the car down, we have reengineered the entire drivetrain, which is now at version 1.5 and will be at version 2 by June. The body supplier was also switched out from a little company that was charging us nutty money and had a max production of three per week to Sotira, who supplies high paint quality body panels to Lotus, Aston Martin and others. In the process, we had to pay several million dollars for a whole new set of body tooling, as the old tooling had been made incorrectly. The old HVAC system was unreliable and cost almost as much as a new compact car, so also had to be replaced. The wiring harness, seats, navigation system and instrument panel also had to be modified or replaced.

After reengineering and retooling virtually the entire Roadster and completely restructuring our supply chain, we are now finally coming to the point where the variable cost of the car (to be clear, this excludes fixed cost allocation) is between $90k to $100k. With a lot of additional effort by the Tesla team and the help of our suppliers, we should be at or below $80k by this summer. There is some variability here due to exchange rate shifts. Although we gain an automatic currency hedge by selling in both Europe and the US, we are still vulnerable to the Yen, which is very strong right now.

Obviously, this still creates a serious problem for Tesla in the first half of 2009, given the $92k to $98k price of most cars delivered over this time period. The board and I did not want to do a retroactive increase of the base vehicle price, as that would create an unavoidable hardship for customers. Instead, apart from a $1k destination charge increase to match our true cost of logistics, we only raised the price of the optional elements and provided new options and a new model (Roadster Sport) to help improve the average margin per car.

The plan as currently projected, and which I believe is now realistic, shows a high likelihood of reaching profitability on the Roadster business this summer. By that time, we will be delivering cars that have a base price of $109k plus about $20k or so of options (having worked our way through the $92k to $98k early buyers) at a rate of 30 per week. We are fortunately in the position, rare among carmakers, of not having to worry too much about meeting 2009 sales targets, as we are already sold out through October and have barely touched the European market.

My paramount duty is to ensure that we get from here to there without needing to raise more money in this capital scarce environment, even if things don’t go as well as expected. I firmly believe that the plan above will achieve that goal and that it strikes a reasonable compromise between being fair to early customers and ensuring the viability of Tesla, which is obviously in the best interests of all customers. It’s also important to note that the price increases will affect 400 customers, all of whom will take delivery after Jan. 1 and receive a $7,500 federal tax credit. We made the pricing changes to ensure the viability of Tesla in the long term, regardless of government incentives, but we hope the credit will offset the increase for most customers.

There is one additional point that relates to the government loans that Tesla is seeking for the Model S program, a much more affordable sedan that we are trying to bring to market as soon as possible. A key requirement is that any company applying be able to show that it is viable without the loans. If we allow ourselves to lose money on the cars we are shipping today, we place those loans at risk. Mass market electric cars have been my goal from the beginning of Tesla. I don’t want and I don’t think the vast majority of Tesla customers want us to do anything to jeopardize that objective.”

Elon Musk
CEO & Product Architect

It’s not the Honda Clarity.

“In the fullness of time, I have no doubt that the Tesla can be honed and chiselled and developed to a point where the problems are gone. But time is one thing a car such as this does not have.

“Because while Tesla fiddles about with batteries, Honda and Ford are surging onwards with hydrogen cars, which don’t need charging, can be fuelled normally and are completely green. The biggest problem, then, with the Tesla is not that it doesn’t work. It’s that even if it did, it would be driving down the wrong road.”

However, I would like to clarify a couple things. Never at any time did Clarkson or any of the Top Gear drivers run out of charge. In fact, they never got below 20 percent charge in either car; they never had to push a car off the track because of lack of charge or a fault. (It’s unclear why they were pushing one into a garage in the video; I’ll refrain from speculating about their motives and their acting ability.)

The “brake failure” Clarkson mentions was solely a blown fuse; a service technician replaced the Roadster’s pump and it was back up and running immediately. They were never without a car, and the Top Gear testing did not put the Roadster’s reliability or safety in question whatsoever. Again, I’m going to leave out comments as to why the good folks at Top Gear might have mischaracterized the blown fuse as a brake failure, which is was decidedly not.

I am also unclear as to why Clarkson said it took 16 hours to recharge the Roadster without qualifying that statement at all. The vast majority of people who have taken delivery of their Roadsters (and there are more than 100 of them now) have much faster systems that recharge from dead to full in as little as 3.5 hours. However, I really enjoyed and heartily endorse Clarkson’s suggestion that, if people want to race Roadsters 24-7, they should simply buy two.

If anyone continued watching the show until the end, you no doubt also saw the show’s astoundingly uninformed coverage of Honda’s hydrogen fuel-cell vehicle, which cannot be purchased at all but rather leased for $600 per month in Southern California to 200 pre-qualified customers in the next three years. Clarkson rips on the Roadster for being three times the price of a Lotus Elise — yet I find it odd that the humble advocates for everyman at Top Gear never even mention the price of the Clarity, which is about five times the cost of a Roadster, according to industry analysts. (Honda refuses to divulge the price of the Clarity, but its previous FCX, first delivered in 2002, cost about $1 million each to produce, and executives have coyly indicated that the new ones are about half the cost of the old ones.)

A conspicuous omission, me thinks. Let the readers beware.

Rachel Konrad
Senior Communications Manager
Tesla Motors Inc.”
[thanks to tigeraid for the link]

“In addition to the $350 million loan application for the new sedan, Musk said Tesla is seeking $100 million to expand its drive train business in which it sells parts to other automakers and $200 million for a battery-cell production factory.”

So I make that $650m in taxpayer funds for a Silicon Valley start-up that’s sold– by its own count– 100 cars. Where do I sign?

Meanwhile, I’m glad to see that MSM has added the word “about” to Tesla’s range claims for their lithium-ion-powered trinket. “Musk today handed over the keys to Tesla’s 100th Roadster at its showroom in Menlo Park, California. The $109,000 car, which can travel about 240 miles on a single charge, was bought by Sam Perry, a Silicon Valley business consultant who was seen on television during President-elect Barack Obama’s election night acceptance speech being leaned on by talk show host Oprah Winfrey.”

Speaking to AutoCar, ToMoCo UK MD Miguel Fonseca “quashed rumours that the next Prius would adopt lithium-ion battery technology at some stage of its lifespan. While he acknowledged that powerful, efficient lithium-ion batteries were a future direction, Toyota’s engineers do not believe they are efficient or durable enough to enter mass-production yet.”

What’s more (or less), Toyota has officially scotched plans to create a Prius sub-brand, casting doubts on Tesla’s mainstream aspirations. No surprise there. Our guys on the front line report that U.S. Prius sales have stalled. Waiting lists? Gone. Parking lots? Full. Discounts? Yup. On the positive side, the guy who made a mint making the movie “Who Killed the Electric Car” drove a Tesla and loves it. Guility. Go figure.

FW: Letter of Apology
Elon Musk
Sent: Monday, November 03, 2008 4:22 PM
To: Everybody

Below is what I believe to be a sincere apology from Peng Zhou for the leak to Valleywag.

To: Elon Musk

Subject: Re: Letter of Apology

——————————————————————————————-

Dear Tesla Motors Employees,

Tesla Motors is a great company and is pioneering the green revolution. I have always been a proud Tesla employee and we all worked extremely hard towards the company mission. Throughout past two years, I also took a wild ride in the great emotional roller-coaster of WhiteStar 1.0, 2.0 and Model S. Having driven Model S mule few times, I truly believe this is the vehicle that will change the world.

However, macro economic climate changed so dramatically and Model S is getting delayed and the company is refocusing. The past month has been very difficult, sitting through planning meetings and watch employees make in or out of the layoff list. It is so sad to lose 87 employees in a week. I became very upset and did the very foolish thing of writing a letter to Valleywag. I have never thought this letter would create such an upsetting situation for Tesla Motors and I should have never sent that letter. When Elon asked the originator of the letter to step forward, I should have done so. I am deeply sorry things happened this way.

I have submitted my resignation with my manager, who had no knowledge of this. I’ll try my best to make situations better for Tesla Motors.

Again, my sincere apologies.

Best Regards,

Peng

“We’ll all be driving electric vehicles some day, because we’ll eventually run out of oil. But by trying to force the timetable on electrics, we’re not doing ourselves any favors. And now that capital is scarce, we need to stop wasting it on quixotic undertakings. Tesla shouldn’t receive anymore financing, and the celebs who ordered Roadsters should ask for their money back.” Uh-oh. And now, for the tombstone inscription: “Tesla won’t have been a total loss. It proved that battery technology could power a car that’s both fast and has decent range.” Define “decent.”