Electric car company about to crash and burn
Flat battery
By Egan Orion: Friday, 31 October 2008, 5:30 AM

SILICON VALLEY upstart electric car manufacturer Tesla seems to be running out of juice, a Bay Area online gossip rag reports.
Tesla is past the prototype stage, having delivered dozens of sporty, slick-looking all-electric vehicles to buyers. It had been considered a good bet to become profitable selling thousands of relatively affordable 'green' cars.
But the company recently laid off dozens of employees and announced that it was closing its Detroit office. Wednesday evening it held an all-hands meeting and told its employees that it has only $9 million left in the bank, according to one employee who'd attended the meeting.
The problem is that the company had collected tens of millions of dollars in deposits from customers for more than 1,200 cars but has delivered only about 50 of the vehicles so far.
The first few hundred cars were reportedly fully paid for, in cash up front, at $60,000 each, and subsequent car reservations required deposits of about $4,000 to $6,000 per customer.
Having already burned through most of its customers' deposit funds, Tesla might find itself unable to deliver vehicles that have already been paid for. Unless Tesla can obtain interim financing in order to build all the cars that it's promised to buyers, things could get ugly. µ

"Tesla chief refutes rumors of company's demise

By Matt Nauman

Mercury News
Article Launched: 10/31/2008 05:11:55 PM PDT

Responding to Internet rumors that its demise is imminent, Tesla Motors' chief executive gave reassurances Friday that the company is solvent and scaling up production of its electric sports car.

The company has a $9 million cash balance, and will close an internal funding round of $20 million or more next week, said Elon Musk, the start-up's chairman, chief executive and primary investor.

"We are making money on every car we ship right now," Musk said in an interview with the Mercury News on Friday afternoon. "As long as we continue to ship cars and ramp up production, we'll be in good shape."

The financial disclosures came after an anonymous Tesla employee posted a note on a Web site suggesting that the company was about to run out of money.

Tesla, based in San Carlos and founded in 2003 by Martin Eberhard and Marc Tarpenning, has become a rolling symbol of Silicon Valley's push toward clean technologies, including solar, biofuels and alternative transportation.

But Tesla has been plagued by production and delivery delays and management shuffles over its short life. Last month, it shut down its Michigan engineering office, laid off about one-quarter of its staff — reducing it from 363 full-time workers and contractors to 276 — and announced that Musk would become the new CEO.

Musk blamed the tight credit market for the company's recent troubles.

Deliveries of the first Tesla model, an all-electric
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two-seat Roadster that sells for $109,000, began earlier this year. Through this week, Tesla has completed 55 cars, and most of them have been delivered to customers. Ten Roadsters were delivered this week, and the company is aiming for 12 a week in November and 30 a week by spring, Musk said. More than 1,200 customers have made deposits and are awaiting cars, he added.

Musk's comments came in response to speculation on two Web sites that Tesla would stop delivering vehicles and go out of business. The reports quoted an anonymous Tesla insider who had attended an in-house meeting on the company's financial condition. A company spokeswoman characterized the reports as "absolutely untrue."

Late Thursday, Musk did an interview with Reuters to quash the rumors. On Friday, he blamed them on a ''bad apple" intent on "selectively disclosing information designed to harm the company."

Once the company raises $20 million, which Musk said will come from many of the original investors and "not just me,'' Tesla will become "cash-flow positive," he said.

In all, Tesla Motors has raised more than $145 million, with at least $55 million of that coming from Musk, who was a founder of PayPal. It failed earlier this fall to raise an additional $100 million it was seeking, Musk said.

The company is waiting for a U.S. Department of Energy loan of between $150 million and $200 million to finance its second vehicle, the Model S sedan.

In September, Musk and San Jose Mayor Chuck Reed announced Tesla had selected a site off Highway 237 as the location for its first factory. A city analysis said the factory could create 1,000 jobs (and 2,600 more indirect jobs) as workers built up to 20,000 Tesla Model S sedans a year. But last month, Musk said the start of production on that car would be delayed six months to mid-2011.

On Friday, Musk said the Energy Department is expected to approve its credit assessment of Tesla by February, and that the environmental impact report on the factory site is due to be completed by May. The federal loan, part of a program to support clean-energy projects using innovative technologies, is "a when, not an if," Musk said.

Tesla will need to raise an additional $50 million or $60 million to begin producing the Model S, an all-electric luxury sedan that will sell for $50,000 to $60,000.

The blogosphere continues to pillory Tesla. Reader comments on the Valleywag.com blog compared Tesla and Musk to two well-known car-company failures, Preston Tucker and John DeLorean.

Another Web site, www.thetruthaboutcars.com, has had 32 postings in its continuing "Tesla Death Watch" series, which started in May.