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Elon Musk's fame used to be a huge advantage for Tesla — but now it's becoming a problem

May 12,2018 17:08

CtW, an investment advisor for union pension funds (some of which hold Tesla stock), thinks this means that Musk's brother, Kimbal, has no business being on the board, arguing that he "has no professional experience in the auto industry" in a letter ...

How Tesla CEO Elon Musk behavior hurts company - Business Insider

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Looking cool!Joe Scarnici / Getty Images for Best Events

Tesla CEO Elon Musk is a rare thing in the car business: a celebrity and a leader.
His celebrity has definitely helped fuel Tesla's rise.
But of late it has begun to reveal some disadvantages.

Maybe you haven't been paying attention to all things Tesla for the past two weeks. Here's an update:
Tesla reported first-quarter earnings and lost over $700 million in three months.
CEO Elon Musk, who is supposed to be sleeping on the floor of his factory in California, flipped out on an earnings call, silencing two analysts and taking 20 minutes of questions from a YouTuber who owns less than 100 shares of Tesla stock and pitched his insights to Musk via Twitter.
The stock tanked.
Musk got on Twitter to attack the offending analysts as instruments of short-sellers; neither has a drastically bearish view of the stock, and both have hold ratings.
The stock bounced back.
Musk warned short sellers that they were in for a world of hurt.
He then spent about $10 million of his own money— more likely obtained via loans pledged to his stake in Tesla as collateral — to buy up more Tesla shares.
Production of Tesla's Model 3 sedan continued to languish well below Tesla's previous production targets, and the company continued to throw people at the problem with 24/7 manufacturing.
Musk again declared that Tesla, spending a billion per quarter to run the business, but with just $2.7 billion in cash on hand, won't need to raise new funds in 2018.
Musk jetted off from California to New York for the Metropolitan Museum's Met Gala, where he dressed like a preacher in a remake of "Casablanca" and squired his reported new girlfriend, musician and artist Grimes, who herself weathered flawed accusations from the internet that she was wearing a Tesla-logo choker.
Musk took to Twitter to quash the Tesla choker rumors.
Whew! That was a lot of action for a fortnight!
Meanwhile, Tesla presumably spent many more millions to expand its production of vehicles in the low five figures. For contrast, General Motors built something on the order of 30,000 Chevy Silverado pickup trucks alone. CEO Mary Barra did not yell at analysts, attack short sellers, lose any money, announce any plans to buy GM stock, tweeted about GM's educational efforts, and didn't dress up as anything.
Maybe it isn't such a great idea to have a global celebrity as a CEO. Here's why:

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Musk takes everything personally. Very personally.

Mark J. Terrill / Associated Press
I left out the part of the earnings call where Musk attacked journalists, whom he sees as compromising the safety of motorists by writing negative items about Tesla's Autopilot technology.
Musk does, in fact, believe that this semi-self-driving system saves lives, and over the long haul, he could be right. But that's assuming Autopilot evolves over time. At the moment, it's effectively just advanced cruise control.
"[I]t's really incredibly irresponsible of any journalists with integrity to write an article that would lead people to believe that autonomy is less safe," he said on the call. "Because people might actually turn it off, and then die. So anyway, I'm really upset by this."
Tesla has argued that Autopilot improves safety, but the US government has disputed Tesla's use of some statistics to support the claim.
Musk is entitled to his opinion, and he's entitled to be upset at journalists. But he shouldn't be telling them what to write about if they think Autopilot might be so oversold to the public that some drivers think it can provide a higher level of self-driving than it does.
There are times to take stuff personally, and times to accept that journalism doesn't care how you feel.

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You never know when he's going to support something extremely iffy, like having his brother on the board of directors.

Big Green
Tesla's board is very light on auto experience. Only Robyn Denholm has ever spent any time in the car business, and that was with Toyota in Australia, according to her bio.
CtW, an investment advisor for union pension funds (some of which hold Tesla stock), thinks this means that Musk's brother, Kimbal, has no business being on the board, arguing that he "has no professional experience in the auto industry" in a letter urging shareholders to vote him off next month.
Kimbal indeed has no auto-industry experience beyond serving on Tesla's board since 2004. Musk does have an all-in-the-family attitude toward business — his cousin, Lyndon Rive, was CEO of SolarCity prior to Tesla merger with the solar operation in 2016.
But with all the misfires Tesla has endured since just 2015, when it launched a production-plagued Model X SUV, Musk as Chairman of his board and CEO could use some more seasoned advice about running a carmaker. The Model 3 debacle should have brought this home for shareholders. It's possibly the most thoroughly botched rollout of a hyped vehicle in the history of the industry.
[Correction: A earlier version of this story mistakenly referred to Robyn Denholm as male.]

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