Tesla Motors replaces CEO, plans layoff

Updated at 1 p.m. PDT with details from Musk's statement.

Electric-car company Tesla Motors has replaced its CEO and plans to lay off some staff members as part of a corporate review, the company announced Wednesday.

Chairman Elon Musk is now CEO, continuing his activities in product development. Former CEO Ze'ev Drori is now vice chairman of the board and is expected to remain active in Tesla operations, according to a company representative, who did not give a reason for Drori's replacement.

The exact staff percentage of Tesla's forthcoming layoff has not been determined, but it is not nearly as high as the 50 percent reduction that had been reported, the representative said.

This isn't the first time that the high-profile carmaker has replaced its CEO since its founding five years ago. Former CEO and co-founder Martin Eberhard was ousted in 2007 by Musk after production delays.

Tesla last month said it intends to make a $250 million investment to construct a corporate headquarters and facility to manufacture its Model S all-electric luxury sedan, which is due in late 2010. But the economic downturn will mean that the start of production of the Model S will be pushed back until mid-2011, Musk said Wednesday.

Musk posted a message to the company blog, saying the layoffs are part of efforts to make Tesla cash flow-positive in the next six to nine months. Like the company representative CNET spoke with, he did not provide a specific reason for Drori's change in position.

"For this critical phase of the company, the scope of my role at Tesla will expand from executive chairman and product architect to CEO. With SpaceX now having reached orbit and about to enter its third year of profitability, I can afford to increase time allocated to Tesla," Musk wrote.

He said the layoffs would be "modest" and will include closing Tesla's Detroit office. Tesla will also focus on its revenue-generating businesses, namely its Tesla Roadster electric sports car and its profitable powertrain business.

To finance its planned expansion, the company intends to take advantage of a Department of Energy loan guarantee, which will make the cost of borrowing far lower than from other sources, Musk added. "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."

[Grumpypaul]

Tesla is replacing personnel again. I still haven't seen any sort of convincing data that supports the idea of the company actually being in business AND building viable vehicles in any sort of long term situation. While it would be nice to see them succeed for a multitude of reasons, I am beyond skeptical that they will last too much longer. The current economic picture only will make things worse, but I don't believe they have a truly salable product that will sustain their existence and I also don't believe the technology is there for them to survive.

[YankeePoodle]

Even though this action is a response to the current economic conditions, some how whatever musk does comes across as a guy who cannot resist power-grab and wants to prove a point or two at turn of every event.

I hope Mr.Musk does not lay-off the innovative people so that the world certainly needs solutions of all kinds to face the energy crisis.

[steveshopa]

America will need low cost, fuel efficient cars for the legions of people who will soon be poorer.
Kei cars are a special class of cars in Japan. They are limited to an engine size of 660cc and have vehicle size, but not weight, restrictions. They are made by many different Japanese car companies and they are mature designs that are reliable, and get up to 60 mpg. They can cost less than $10,000.
However, they cannot be driven in the U.S. because they don't meet collision safety requirements.

I believe that adding my crumple box invention to a Kei car will allow it to pass U.S. collision safety requirements. See my website www.safersmallcars.com

[Manhattan2]

If Elon Musk is serious about making Tesla work and living up to the name of "Tesla" there needs to be more imagination and less PR. We can deliver what you need. Track us down at Solar Transfer.

[dublinmotor]

The PR Spin continues, there is no real strategy on the Sedan, no funding and the site has all kinds of issues associated with it that the not so forthright Mayor of SJ forgot to share. The locals here know why the site is still empty. These are the final hours of a egotistical man that was rightfully fired while on vaction at PayPal. Money and human capital is better invested elsewhere.

[sylviechen]

Perhaps there is more of a technology story than a financial one here.
They are betting their business on using batteries designed for personal computers. That's why they need so many of them and their recharge cycles and possible overheating are problematic.
New battery technologies are providing more efficient alternatives and are just now coming to market.
By stretching out to 2011 for delivery, they probably can give themselves some breathing room to solve this problem.

[sylviechen]

Perhaps there is more of a technology story than a financial one here.
They are betting their business on using batteries designed for personal computers. That's why they need so many of them and their recharge cycles and possible overheating are problematic.
New battery technologies are providing more efficient alternatives and are just now coming to market.
By stretching out to 2011 for delivery, they probably can give themselves some breathing room to solve this problem.