Despite rave reviews of its Roadster halo car, grim news has been hanging over electric car start-up Tesla in the past few weeks. When the company was unable to raise $100 million from investors earlier this month, the company laid off 100 employees, pushed back development of its new Model S sedan and announced the closing of its Rochester Hills, Michigan, offices. Now, a letter has been posted to a Silicon Valley blog suggesting that the company is nearly out of money, but founder and new CEO Elon Musk says that isn't so. Musk is so sure about his company's future that he's personally guaranteeing every car ordered -- with his own money if necessary.
0:00 / 0:00
"I've gone on record as saying that I am personally standing behind delivering the cars and the deposits for the company," Musk told Reuters late on Thursday. "I have the means and wherewithal to do so. So people should have absolutely zero concern about their deposit."
Musk became a billionaire after founding PayPal, the online transaction business now owned by eBay. While the letter referenced an employee financial briefing earlier this week, Musk said the company still has $9 million in the bank and expects to finish another round of fund-raising from investors worth $20 million this week.
"It's a bit silly. If we had almost no money in the bank then one could say that we are about to run out of money," said Musk. "But I think it's kind of silly to say that with $9 million in the bank."
Tesla has taken orders for more than 1200 Roadsters world wide, but has delivered less than 60 since production began in March. Early models were plagued by problems with the two-speed transmission, but Tesla says that the problem has been rectified with a new single-speed transmission. Musk said that the company has taken deposits of $5000 to $60,000 for the $100,000-plus electric sports car with the understanding that those funds can be used however Tesla needs them. Despite the shaky economy, production delays, cost overruns and failing to meet its previous fund raising goal, Musk is optimistic about the company's future.
"We didn't raise the $100 million but we still need to raise some money to get to cash flow positive," Musk said. "We actually probably only need on the order of $20 million to do that. We're going to raise more than that, but we only need about $20 million."
Tesla is also waiting on $200 million in loans for the Department of Energy that are expected to become available during the second quarter of 2009. The company expects those loans to offset 80% of the costs related to developing its planned Model S sedan. Production of the new sedan has been pushed back to 2011. However, those loans are not guaranteed, and only a week ago, Musk blogged that "these are extraordinary times," and painted a cautious picture of the future. Analysts, however, were less optimistic.
"They've got some real severe problems," said Joe Phillippi, an independent, New York-based automotive analyst. "Surviving is not the same as prospering."
Source: Reuters
Were you one of those kids who taught themselves to identify cars at night by their headlights and taillights? I was. I was also one of those kids with a huge box of Hot Wheels and impressive collection of home-made Lego hot rods. I asked my parents for a Power Wheels Porsche 911 for Christmas for years, though the best I got was a pedal-powered tractor. I drove the wheels off it. I used to tell my friends I’d own a “slug bug” one day. When I was 15, my dad told me he would get me a car on the condition that I had to maintain it. He came back with a rough-around-the-edges 1967 Volkswagen Beetle he’d picked up for something like $600. I drove the wheels off that thing, too, even though it was only slightly faster than the tractor. When I got tired of chasing electrical gremlins (none of which were related to my bitchin’ self-installed stereo, thank you very much), I thought I’d move on to something more sensible. I bought a 1986 Pontiac Fiero GT and got my first speeding ticket in that car during the test drive. Not my first-ever ticket, mind you. That came behind the wheel of a Geo Metro hatchback I delivered pizza in during high school. I never planned to have this job. I was actually an aerospace engineering major in college, but calculus and I had a bad breakup. Considering how much better my English grades were than my calculus grades, I decided to stick to my strengths and write instead. When I made the switch, people kept asking me what I wanted to do with my life. I told them I’d like to write for a car magazine someday, not expecting it to actually happen. I figured I’d be in newspapers, maybe a magazine if I was lucky. Then this happened, which was slightly awkward because I grew up reading Car & Driver, but convenient since I don’t live in Michigan. Now I just try to make it through the day without adding any more names to the list of people who want to kill me and take my job.
Read More