Musk Survives Shareholder Vote As He Plots Escape From Model 3 “Production Hell"
Courtesy of Zero Hedge
Elon Musk has survived a shareholder vote to strip him of Tesla's chairmanship and replace him with an independent director, a plan that was backed by Norway's sovereign wealth fund, the world's largest, among other Tesla shareholders. The proposal, which was defeated in a vote at yesterday's shareholder meeting, represented the strongest challenge yet to Musk's power over the Silicon Valley car manufacturer.
According to Reuters, Norges Bank Investment Management, favored dividing the roles of CEO and chairman to boost corporate governance. The fund also opposed the re-election of board member Antonio Gracias, though it backed the reappointment of both James Murdoch and Elon Musk's brother, Kimbal Musk. This isn't the first time the wealthy Norwegians has opposed Musk: the company previously voted against Musk's pay package back in March, which at the time was valued at $2.6 billion, but might ultimately be worth much more. The wealth fund holds a 0.48% stake in Tesla at the end of 2017, making it worth $252.5 million.
Meanwhile, despite the recent underperformance of Tesla stock, shareholders appeared willing to look through the growing production problems. Though Musk has consistently overestimated Tesla's ability to meet production goals, investors proved once again that they're willing to take his projections at face value – no matter how fantastical they might be – when Tesla shares jumped after Musk said it's "quite likely" that Tesla will build 5,000 Model 3 sedans a week by the end of the month. The company's profit- and cash-generation targets for the rest of the year are dependent on reaching this target, Musk said. Musk added that production has improved to 3,500 Model 3s a week.
After retaining the Tesla chairmanship, Musk claimed that it's "very difficult" to become a "mass-manufacturing car company" and that "no one has succeeded in doing this in a very long time in the US."
Of course, these production hiccups have been one of the reasons why Tesla burned through more than $1 billion in three of the last four quarters. And one activist group said it would oppose the reappointment of all three Tesla directors up for a vote yesterday because of the production delays.
Countering growing skepticism, Musk said that the addition of a third general assembly line at Tesla's Fremont Factory has helped Tesla turn the corner on manufacturing - adding that cars are moving through the new line "crazy fast," according to Bloomberg.
"The biggest constraint on output is general assembly," Musk said. "We can probably get to 5,000 a week with the current two general assembly lines. But with the third one, I’m highly confident that we can exceed 5,000 units per week."
As Bloomberg notes, manufacturing has befuddled Tesla ever since Musk predicted 11 months ago that “production hell” would be ahead for the first car the company was trying to make in high volumes. If indeed Tesla is up to 3,500 Model 3s, on its way to 5,000 by the end of the month, Tesla may soon move from hell to just purgatory.
Tesla is also toying with the idea of expanding capacity by adding another plant, which would produce cars, battery packs and powertrains in Shanghai. More details should be forthcoming next month, Musk said.
Despite having not yet reached its targets with the Model 3, Musk is already touting new models that will start production next month – like the all-wheel drive version of the Model 3. Tesla will unveil the Model Y crossover in March, which will go into production in the first half of 2020. Tesla then plans to unveil the Model Y crossover in March. That will go into production in the first half of 2020, along with the Semi truck and Roadster models.