Electric car manufacturer hit by financial crisis

Over the past five years Tesla Motors has gained some high-profile fans including George Clooney, Arnold Schwarzenegger and the founders of Google.

But the Californian company – which makes electric cars, including a £63,000 convertible which can reach speeds of 125mph — yesterday admitted it was losing money and said it would be cutting jobs and scaling back expansion.

The announcement came after the company said it had failed to attract a further $100m investment because of the worldwide financial crisis.

In a statement released on the Tesla website, the company said it was reshuffling its management team and making "modest" staff cutbacks. Elon Musk, the South African entrepreneur who was an early investor, will take control of day-to-day operations as the company's new chief executive.

"We have decided that the wise course of action is to focus on our two revenue producing business lines," Musk said in the statement. "Our goal as a company is to be cashflow positive within six to nine months."

Musk insisted that the rollout of Tesla's flagship product, the $109,000 Roadster sports car, would continue — but admitted that a parallel scheme to produce a lower-cost mass market car would be affected.

Industry observers had been closely watching the development of the $60,000 (£34,600) saloon, known as the Model S, but Musk admitted that production would be delayed until at least 2011.

He also confirmed that the company planned to close its offices in Detroit — America's car-making capital — but would continue with a scheme to open a new $250m, 89-acre base at San Jose in California.

Musk said Tesla needed to adopt a "special forces" attitude, but would not confirm how many staff would lose their jobs — though reports that up to half of the company's 250 staff could be axed have been denied.

It is not clear whether an operating deal with UK sport car company Lotus, which assembles the Roadster at its headquarters outside the Norfolk village of Hethel, will be affected.

"One of the steps I will be taking is raising the performance bar to a very high level, which will result in a modest reduction in near-term headcount," he said. "I believe Tesla must adhere more closely to a special forces philosophy at this stage of its life if we aspire to become one of the great car companies of the 21st century."

It is only a year since the company's last boardroom reshuffle, which brought in Ze'ev Drori as chief executive. However Musk, a 37-year-old South African serial entrepreneur who made his fortune by selling internet payments service PayPal to eBay for $1.5bn, said he now had more time to spend on the company.

He even appeared to offer his personal wealth — estimated at some $300m — as collateral.

"The Tesla investors and I are unequivocally dedicated to ensuring the success of Tesla. If you have bought a car from Tesla or are thinking of doing so, please know that I personally stand behind delivering a product that you will love."

"I will do whatever is needed to ensure that Tesla has more than sufficient capital to get there."

Named after the father of modern electrical systems, Nikola Tesla, the company has become a poster child for the electric vehicle movement since being founded in 2003 by two engineers.

Along the way the Californian outfit has scooped awards for its high-performance electric sports car, as well as winning over both environmentalists and Silicon Valley grandees with its cutting-edge technology.

The company has already raised more than $100m in funds from investors including Google founders Larry Page and Sergey Brin, as well as former eBay president Jeff Skoll — but so far has only delivered 27 vehicles to willing buyers.

However, despite a slow start its backers believe that Tesla has the possibility of challenging the giants of the American car industry, particularly with increasing public concern about the environmental impact of cars and sharp increases in petrol prices.

A string of other companies, including US-based Fisker Automotive and French maker Venturi, are also building electric or hybrid vehicles. Leading Japanese manufacturer Honda, meanwhile, announced earlier this year that it had sold more than 1 million of its market-leading Prius hybrid cars.
source:guardian