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Elon Musk Races to get out of Tesla’s “hell of production”



FREMONT, Calif.-Dress of the same black color

Tesla
Inc.


TSLA 0.73%

T-shirt that he wore when he entered the factory of his car three days before,

Elon Musk

They sat under fluorescent lights in a group of desks near the body shop.

In a chair next to him was a white pillow without a shell that he used while sleeping on the floor under his desk. The billionaire CEO and president of the electric car maker was not far from two general assembly lines that manufactured the Model 3 sedan, surrounded by the sound of metal pounding.

Outside, under a giant makeshift tent, workers were also building sedans on a hastily constructed third line.

"We made a lot of mistakes, that's why we're here," Mr. Musk said in an interview last week. He seemed calm, even optimistic at times, despite not having left the factory in three days in a row, trying to make sure that the company finally achieves its goal of building 5,000 models 3 a week, after two unfulfilled deadlines. Saturday is the last deadline; An announcement about production capacity is expected within a few days after that.

Mr. Musk and Tesla are at a crucial time, as the company aims to mass-produce Model 3 and transform from a non-profitable niche player into a major and profitable automaker. Tesla has approximately 40,000 employees and a market value of $ 58 billion, rivaling

General engines
Co.

A non-conformist entrepreneur, Mr. Musk helped revolutionize online payments by co-financing

PayPal

built a rocket company, SpaceX, valued at $ 21 billion, and with Tesla created a luxury brand that popularized electric vehicle technology that automakers rejected for years.

Mr. Musk, who turns 47 on Thursday, sets a high standard in the hope that if he achieves a fraction of his goal, Tesla will be successful, people familiar with his thinking said. Despite his success, Mr. Musk may be his worst enemy, setting unrealistic expectations publicly and sometimes showing an erratic management style that adds to Tesla's challenges, say investors, former Tesla executives and close observers.

"Organization and execution is where it does not look as good as other great leaders," said James Anderson, who oversees Tesla's investment in Baillie Gifford, the automaker's third-largest institutional shareholder, which owns nearly 13 million shares . He is "divided" over whether Mr. Musk is the right leader for Tesla in the future, but he remains patient because of the potential.

"We support for the moment, but it's not necessarily permanent," Mr. Anderson said. [19659007] Tesla has been delayed six months in the production goal of Mr. Musk's Model 3. The delays have stretched Tesla's cash position, led Moody & s Investors Service to lower their debt and helped their shares fall 5.6% in the last year.

Mr. Musk took the stage at a launch party for the Tesla Model 3 sedan and warned employees that they would be in "a hell of production." I expected it to last approximately six months. That was almost a year ago.

He admits that some problems that led to the delay are of his own creation. When asked if the "hell of production" he predicted would be self-inflicted, Mr. Musk shrugged. "Most people are their worst enemy," he said in last week's interview.

While Tesla struggled to produce Model 3, Musk rejected executives' warnings about production goals, complicated Tesla's assembly process and scared Wall Street. fair with analysts.

At least 50 senior vice presidents or executives have left in the past 24 months, according to people familiar with the company, in part because of the acquisition of SolarCity Corp. Mr. Musk says he sees the rotation of Executives like being online with other big companies.

Some former executives say that Musk's momentum can be invigorating, making them feel part of a larger goal to change the world. But that fades away as he becomes increasingly impatient, sometimes blaming managers for losing their unlikely goals, they say.

As an owl, Mr. Musk often shoots emails at unusual times. After some evening meetings, he sends messages to the subordinates detailing a problem, adding only the name of the recipient and a question mark.

Mr. Musk, whose other projects promise transports to Mars and tubes that whip people across the country, is irritated to be informed of what is impossible. "People have said that all my life, what else is new?" He said last week. "They also said we could not land rockets." His company Space Exploration Technologies Corp., or SpaceX, did so in 2016.

At Tesla, Mr. Musk wanted to reinvent the assembly process as the company prepared to unveil Model 3 in early 2016.

He began to talk about "the machine that builds the machine" and envisioned a factory free of people who could produce cars at a pace that only slowed down because of the air resistance.

Tesla had initially planned Gradually increase production of Model 3 with the goal of making a total of 500,000 vehicles, including other models, by 2020, according to people familiar with the plan. That would allow the new main car revenues to pay for Tesla's expansion, they said.

But Mr. Musk wanted to accelerate production after a surprisingly strong interest in the 3-Tesla Model that received 180,000 bookings in the 24 hours after the announcement of the car, which has an initial price of $ 35,000.

Its executives backed down, warning that it was not feasible because the design of the car was not yet locked in place, the robots and tools needed to be ordered, and time was needed to resolve the inevitable faults in the complicated assembly process until late. of 2017, say people familiar with the conversations.

Mr. Musk went ahead, declaring publicly in May 2016 that Tesla would manufacture up to 200,000 Model 3 cars in the second half of 2017. Tesla finished doing about 2,700.

Mr. Musk, in last week's interview, defended his decision to advance the schedule. Some executives are looking to "outsource responsibility and say it was anything but their fault," he said.

He said that, in any case, he should have "restricted the time" because Tesla would have discovered more quickly an approach that was not a course of work and corrected.

In July 2017, Mr. Musk announced that production had started and had reduced the plans, promising 20,000 Models 3 in December. Tesla was still making parts of Model 3 in the first weeks of production. The workshop was not fully installed until September and took weeks of calibration to ensure that the robots avoided the collision in the middle of the vehicle's welding ballet.

Tesla installed 1,028 robots in its Fremont body shop, approximately one third of which were exclusive upside down so that the company could fit more into the Fremont space.

Mr. Musk thought keeping the robots close to each other would increase efficiency, people familiar with the effort said.

At Tesla's battery factory outside of Reno, Nevada, the designs of automated robots were so complex that they could not make batteries. In October, Mr. Musk camped at the factory, posting a video on social media with a mug of plastic whiskey, roasting a marshmallow on the ceiling while singing Johnny Cash's "Ring of Fire." He tweeted: "Hell of production, ~ 8th circle".

The Fremont factory at Tesla had difficulty implementing Mr. Musk's dream of an automated transportation system that runs under the general assembly line. Unlike the typical automobile factories where workers delivered parts to work stations, Mr. Musk wanted boxes to transport the parts to the automatic elevators that would lift the right amount of parts at the right time. Tesla invested between 80 and 90 million dollars in an automatic storage system, according to a person familiar with the effort, but the engineers had trouble making it work.

Tesla started part of the conveyor system and hired more workers to execute parts in the factory. Subsequently, the company used the conveyor for the improvised assembly line under the tent to improve the chances of meeting the goal of 5,000 a week, believing that it could handle a maximum of 7,000 cars per week, according to a person familiar with the company. The issue. .

Mr. Musk admits that he relied too much on automation. "You really want the process to be well defined and then automate, rather than assume that you know what the process will be, and then automate that," he said in the interview.

Some of your atypical manufacturing ideas can still bear fruit. Tesla has its own seats for Model 3, a move that says it saves costs. And in the body shop, where the vehicles are welded, Tesla estimates that it can save 36 shifts to people by automating the process of loading some materials on the line.

After Mr. Musk ignited Wall Street in May during Tesla's quarterly financial call cutting analysts: "Boring questions are not good," he said, and tried to amend it by calling some of the biggest shareholders in Tesla, including Baillie, Fidelity Investments and

T. Rowe Price

to calm worries, said people familiar with the matter.

Fidelity and T. Rowe declined to comment.

Mr. Musk has been extended to other projects. A recent seven-day period saw him overseeing a SpaceX rocket launch, announcing an administrative reorganization at Tesla, criticizing Twitter media for covering the accident of a Tesla vehicle in Utah using driver assistance technology, and appearing in Los Angeles to promote a parallel project, The Boring Co., to dig a tunnel under the city.

He acknowledged that he is very thin, but says he is focused on the production goal.

"I feel good about things," he said. . "I think there's a good vibe, I think the energy is good, go to Ford, it looks like a morgue." He said he just learned the phrase "What's your environment?" From his new girlfriend, the musician known as Grimes. Earlier in the day, Draymond Green, the Golden State Warriors star just winning an NBA championship, stopped at the factory.

Later that day, Musk flew to Salt Lake City to recruit artificial intelligence talent at a conference. He planned to return to Fremont a few hours later.

Write to Tim Higgins at Tim.Higgins@WSJ.com and Susan Pulliam at susan.pulliam@wsj.com

.


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