Executive Departures, Elon Musk Toking Up Cast Doubt On Tesla’s Future

Tesla’s stock took a hit, dropping about 18 points, after a top executive left. This sparked a day’s worth of coverage about the future of the company.

It’s been a noisy month for the luxury, electric car company. It all started with CEO Elon Musk’s cryptic tweets about possibly taking the company private. Since then. there have been a number of abrupt departures amongst the executive staff. Friday, the man meant to be the next Chief Financial Officer resigned. All this happened while Musk was on a popular talk show making headlines because he took a tentative puff from a marijuana and tobacco cigar. Ultimately, all this led Tesla stock into a 20-point dive. When the market closed, it had only gained back three meager points to close down at 17. 

Of course, all this drama speaks to a central problem at the heart of Tesla, and that’s its inability to meet production goals. Musk wanted Tesla to be producing 6,000 Model 3s per week, and they are barely at 4,000 per week. The company currently has about $10 billion in debt and since going public, has felt pressure from investors to be profitable. It creates an unflattering narrative when the company struggles to meet production goals, while its CEO gets in feuds with C-list pop stars, tweets erratically, and allegedly smokes up with a stand-up comedian. Still, let’s take a deeper look at what is really going on with Tesla and the electric vehicle industry.

great luxury car

Credit: Tesla

Tesla’s Chief Accounting Officer Resigns After Just a Month

When Dave Morton joined Tesla during the first week of August, it was as the Chief Accounting Officer for the company. However, the plan was always that he would, essentially, matriculate to the office of Chief Financial Officer. Yet, in just a month’s time he became so disillusioned with the company and (by implication) its headline-grabbing CEO.

In a company filing obtained by CNBC, Morton found the public scrutiny on the company and the pace at which it moves “exceeded [his] expectations.” He said he still believes in the company and that his departure is amicable.

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Credit: Tesla

On his second day with the company, Musk fired off a tweet that shook the market and set off a flurry of speculation. Musk said he had secured funding to take Tesla private, saying that the company could focus on innovation without pressures to deliver for its investors in the way it does on the markets.

Surprisingly, Morton seemed all for the idea and approached Musk to do the hard work to achieve the public-to-private transition. After two weeks it’s reported Morton felt that he wasn’t being taken seriously and contemplated his exit. A series of lawsuits and attention from the Securities and Exchange Commission caused Musk to publicly pull back on privatization. Investors who short sold Tesla shares also filed a class-action suit as well. They claim Musk illegally manipulated the market with his privatization tweet which sent the stock price climbing. The plaintiffs say this cost them a collective $1.3 billion to “cover their positions” in the aftermath, despite the many signs Tesla was not going private.

Not the First Executive to Leave This Summer

The same day that Morton departed the company, Gabrielle Toledano announced that she would not return to her position as head of Human Resources after taking a leave of absence. She, in turn, is not the only executive to leave the company rather than return after an extended break. Vehicle Programs Lead for Tesla, Doug Fields, left the company in May for a leave of absence and stepped down in July, Verge reports. In fact, investors shorting Tesla’s stock keep a running document highlighting the 23 (at the time of this writing) executive-level departures from Tesla since June 2018.


Credit: Wikimedia Commons, Steve Jurvetson

Of course, this looks bad for Tesla, but executive shuffling happens, and companies survive. Another report from the Verge posits a different theory, saying that what really threatens Tesla is the company’s inability to produce enough cars to remain profitable. Pretty much every expert expects Tesla to remain in-the-red, save for Jonathan Cooper of Seeking Alpha. Showing his math, he explains that profitability is in Tesla’s reach, but it all comes down to production. There is also the matter of Tesla’s $10 billion in debt. The company is not in freefall, but it could stand to be on surer footing. 

What Was Elon Musk Doing?

In the month since Morton joined and, now, left Tesla, CEO Elon Musk has been going on about his normal business but trying to avoid discussing or answering questions about his privatization tweet. Yet, the evening immediately preceding the departures, Musk appeared on comedian Joe Rogan’s talk show. If it had been just a podcast, Musk might have been fine.

However, since we live in an age of technological miracles, Rogan streams the entire podcast for free on YouTube. This meant that when Rogan, an avowed cannabis user, offered Musk a half-tobacco, half-marijuana cigar, there was video of the moment he took a tentative puff on it. Thus, these images played over stories of the executive exodus. Because of Space X’s contracts with NASA and the government, the U.S. Air Force is “looking into” what happened.

Of course, what Musk did on Rogan’s show with that cigar is so irrelevant it’s almost silly. From the clip it appears that Musk doesn’t even inhale the smoke, which is akin to taking a sip of tequila and then spitting out every drop. Still, it’s a public relations disaster for Musk who has been earning far more negative than positive headlines lately.

When things are going well, a company’s CEO can get into antics and be a “bad boy.” Yet, when a company is in crisis, or at least appears to be, the CEO needs to trim the distractions and provide focused leadership. The question on everyone’s minds right now is if Musk has it in him to do that before it's too late for Tesla. 

Tesla is on track to actually have a good year beyond all this extraneous drama, and that’s all that’s really important.

Elon Musk famously said when he released all of Tesla’s patents to the public, that he considered every gas-guzzler Tesla’s competition. However, some years later, Tesla is not alone in the electric vehicle game. For example, Jaguar pledged to go all-electric in the near future, and are retro-fitting their classic cars with electric motors. Even bigger automakers, those with a lot production power, are getting into this game. Like it or not, other electric cars are also competition for Tesla. Nice as the Model 3 is or the 4 or 5 will be, an electric vehicle available right away as opposed to months later will win every time. 

It would be a collapse of unprecedented proportions if Tesla collapses any time soon. However, they need to start putting up positive headlines and hitting production goals. Oh, and of course, they have to start turning a profit some time.

What do you think? Share your thoughts, reactions, and predictions in the comments below. Don’t forget to share the article online and get your friends in on the conversation. 

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