Daniel Englander
Tesla Hires Gun, Will Shoot Its Way Out May 16, 2008 at 9:52 AM
Tesla Motors has a couple of problems looming on the horizon. First, the EV company is involved in a handful of legal actions involving IP theft and broken contracts. In February, Magna Powertrain sued Tesla for breach of contract, alleging the EV company failed to pay it for design and engineering work it perform on Tesla’s always problematic transmission drivetrain. Tesla sued Fisker Automotive in April, alleging the Other EV Sports Car Company stole some of its engineering designs and used those plans to build its own EV roadster. Earlier this week Fisker filed a motion to remove the case to arbitration in Orange County, arguing the design contract between Henrik Fisker and Tesla contained an arbitration clause barring private rights of action.
But this is the U.S., and companies suing the pants off each other is nothing unusual. Tesla’s real problem is that its production ramp is about as lame as my family’s old dog with leukemia and Addison’s disease. After two months of production, the company has only managed to fully complete five cars. Six and seven are in the pipeline, though company predicts a full ramp up by November, two months after its proprietary drivetrain gets delivered. That is, of course, if its able to figure out that pesky Magna lawsuit. So much for a car a week. The problem here is that mass production of such a technically complex vehicle is pretty ambitious - maybe too ambitious, and also incredibly expensive. Especially when you’re relying on third-party components, as Tesla is, and definitely when it looks like you might be running out of cash. Did somebody say IPO?
With all this mess, what is a girl to do? Tesla’s decided to take a page out of the Magnificent Seven playbook and hire itself a mercenary in the form of Larry Sonsini, chairman of the legendary Silicon Valley law firm Wilson Sonsini Goodrich & Rosati. Tesla appointed Sonsini, whose particular skill set involves taking companies public, to its board of directors this week. Tesla chairman Elon Musk said “Larry Sonsini has played a role in building and advising some of the most successful companies in existence today. His guidance will be invaluable.”
What guidance is that? Most likely one that extricates Tesla from their nasty legal problems, and probably one that guides the beleaguered, over-hyped EV company onto the public markets. Either way, Sonsini’s appointment may mean Tesla’s gearing up for an old-fashioned Sand Hill showdown. Best hide the women and children.
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This article is so flawed I don’t know where to begin!
Lets start with the fact that Larry Sonsini does not just join boards of people who want his legal assistance. If that were the case he would be on many hundreds of boards. His joining our board has nothing to do with the lawsuits you mention, although his experience in such matters is obviously valuable, as is his experience in other areas of corporate governance and corporate finance.
Regarding production of the Roadster: we anticipated a slow ramp and are a bit behind the schedule in the early going (as we reported to our customers and on our blog), but that has nothing to do with the fact that we “are relying on third party components.” What does that even mean? All car manufacturers rely on third party components for all their cars.
Our planned acceleration of production when the final transmission is completed has nothing to do with the Magna lawsuit. The transmission that Magna designed, which proved not to be durable, is history. The lawsuit is over a disagreement as to what is owed at the conclusion of that relationship. Our plans for the permanent transmission are unrelated to the lawsuit and have no connection to it. On what basis are you conditioning our completion of the final transmission to the conclusion of that legal matter?
This article is a poor mashup of other people’s reporting with some lazy speculation thrown in. I’m all for open discussion and healthy criticism but this is just bad reporting.
Darryl from Tesla.
hey darryl - always good to hear from you. so, when’s your IPO date?
also, sonsini’s an interesting choice. i believe the man was once described as the “Larry Bird of Silicon Valley. The go-to guy when you need the thing to work.” (http://money.cnn.com/magazines/fortune/fortune_archive/2006/11/27/8394382/index.htm)
So, what’s not working? If your primary goal here is ramping up production to meet targets, get cars into customer hands, and actually fill that Apple Store lookalike you’ve built in Los Angeles with a saleable product, why didn’t you get a board member with a background in, I don’t know, cars? I hear Lee Iaccoca isn’t too busy these days.
It’s interesting that you’ve chosen to focus here on “corporate governance and corporate finance.” Did WS Investments take a stake in Tesla?
WS and/or Larry Sonsini did not take a stake in Tesla