Tesla Says It Will Lay Off Employees and Delay Its All-Electric Sedan Until 2011

Tesla Motors, an electric car start-up in Silicon Valley, said Wednesday that it would lay off employees and delay production of its second car, the Model S. Tesla also removed its chief executive, Ze’ev Drori, and appointed Elon Musk, the company’s chairman and principal investor, to the position.

Mr. Musk posted the changes on Tesla’s Web site. He said the company was in a “critical phase” and would have a positive cash flow within nine months.

He blamed the worsening financial crisis and the credit crisis for the upheaval. “It’s not an understatement to say that nearly every business will be impacted by what has unfolded in the past weeks,” Mr. Musk wrote. The cutbacks come after warnings from Silicon Valley venture capitalists that start-ups should slash expenses and reach profitability as quickly as possible to survive the economic downturn.


Tesla, the poster child for the Valley’s push into “clean technology,” has had a particularly difficult year, with previous layoffs, executive turnover and production delays for its first car, a $109,000 all-electric roadster, as well as the Model S sedan.

Mr. Drori, who was the chief executive since November, will remain at Tesla as vice chairman. He replaced Tesla’s former chief, Martin Eberhard, a co-founder, who was ousted in August 2007. Mr. Musk is the fourth chief executive since the company was founded in 2003.

Mr. Musk and Mr. Drori declined interview requests. The company does not know how many of its 250 employees will be laid off, said Rachel Konrad, a company spokeswoman. Tesla, based in San Carlos, Calif., will close its office near Detroit.

The Model S, which is intended to travel 200 miles on a single charge of its lithium-ion battery pack, is expected to sell for around $60,000. It’s introduction will now be delayed from 2010 to mid-2011, six months after General Motorsis expected to offer its electric Chevrolet Volt.

In September, Tesla announced that it would lease 89 acres in San Jose to build a headquarters and factory.

Tesla is trying to raise $100 million to add to the $146 million it has already raised. Backers include Mr. Musk, who made his fortune as a co-founder of PayPal; Jeff Skoll, former president of eBay; and Larry Page and Sergey Brin, co-founders of Google. Tesla is also waiting for a low-interest loan from the Energy Department, which the company cannot use until it passes an environmental review.

In the meantime, Mr. Musk said, Tesla will focus its efforts on making the Roadster, which has a one-year waiting list. It will also increase power-train sales to other car companies, a business that Mr. Musk said was profitable.

“We are not far from being cash-flow-positive, but, even if that threshold ends up being further than expected, I will do whatever is needed to ensure that Tesla has more than sufficient capital to get there,” he said.