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Tesla Stalls--Layoffs And CEO Change Coming (Update)

Wednesday, 15 Oct 2008 | 2:44 PM ET
Tesla
Tesla

Tesla Motors, the up-and-coming, high-end electric sports car maker, is suffering through yet another massive reorganization that will cost nearly a hundred workers their jobs, including the company's CEO Ze'ev Drori.

Elon Musk, the company's chairman and its original financial backer will assume the role of chief executive.

Tesla is also announcing that its highly anticipated electric sedan will be delayed by at least 9 months, and no one seems to know what will happen to the company's ambitious plans for a new, $250 million manufacturing plant in San Jose that was announced just a few weeks ago with the help of California Governor Arnold Schwarzenegger who touted Silicon Valley as the next generation of Detroit for electric vehicles.

This is the fourth chief executive change at the company in just 12 months, though company officials say Drori will stay on at the company in some role, likely as "vice chairman."

At last count, the wait-list for the $100,000 electric sports car stretched past 1,200 names with each of those individuals putting down a hefty deposit for the privilege. Tesla, however, has only delivered 40 vehicles to customers and can manufacture fewer than five cars a week at its small production site here in Silicon Valley. Nonetheless, the recent credit crunch may have played a part in dramatically curtailing the company's expansion options.

The company has yet to make an official announcement about all this, but will likely notify customers and media on its corporate blog network found here.

Update: Newly named Tesla CEO Elon Musk has posted a blog detailing the company's significant reorganization. He calls these "extraordinary times," citing the global financial crisis that's the worst we've seen since the Great Depression.

So Tesla will now focus on two product lines only--the $109,000 roadster and powertrain sales to other car companies. He confirms that ousted CEO Ze'ev Drori will stay on as vice chairman of the board, saying "it has been and will continue to be a pleasure and an honor working with Ze'ev."

He terms the layoff as a "modest reduction in near term headcount" but does not offer a precise figure.

He confirms the delay of the Model S sedan of about six months, with production now slated for mid-2011. At the same time, Tesla is confirming that planning for this line of cars will be reduced as the company awaits Department of Energy loan guarantees. The company is also awaiting environmental approval of its 89 acre, $250 million manufacturing plant in San Jose, something it anticipates occurring in the second quarter of next year, and another reason for the delay of the S Model.

No question that Tesla is another victim of the massive credit crunch, trying to finance that plant, looking for another $100 million in equity capital, which would double what the company has already raised.

This company, with its sporty, high-end electric car and emphasis on the environment, became the darling of Hollywood, with an extensive celebrity clientele awaiting delivery of their cars. The company was also featured in a glowing profile on "60 Minutes" just two weeks ago.

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