Arthur J. Villasanta – Fourth Estate Contributor
Hawthorne, CA, United States (4E) – A vocal group of disgruntled Tesla, Inc. stockholders tried — and just barely failed — to dismiss Elon Musk as chairman of Tesla at a raucous stockholders meeting held amid a sea of bad news for the beleaguered firm.
Tesla claims a “supermajority” of shareholders rejected the proposal to force Musk to step down as Tesla’s chairman, a position he has held since 2004. The rebels led by CtW Investment Group, an activist firm that represents labor union pension funds, spearheaded the rebellion that also sought to oust three Musk allies from the board of directors: Antonio Gracias, James Murdoch and Elon’s brother, Kimbal Musk. This effort also failed. The rebels allege the trio don’t know about the auto industry at a critical time in Tesla’s existence.
Musk described the past few months as among the most “hellish” in his life, and with good reason. In late March Moody’s downgraded Tesla’s debt to junk bond status as the company struggled to boost production of its Model 3 all-electric, four-door sedan already far behind schedule.
And in April, Goldman Sachs urged its clients to sell their stock in Tesla, convinced the electric car maker can’t make good on its production target of 5,000 Model 3 sedans per week. “We believe the sustainable production rate for the second quarter of 2018 is most likely below the 2,000 vehicle mark the company achieved in the final week of the (first) quarter,” said Goldman in its analysis. “We see the company likely sustaining Model 3 production around the 1,400 per week mark.”
These chronic production delays have forced Tesla spend more than $1 billion during the first three months of this year alone to ensure it can meet its mythical production target of 5,000 Model 3 sedans per week. This fact has led to investors worrying Tesla will have to sell more stock or add to its already massive debt load to raise enough money to survive.
Musk pooh-poohed these fears and in typical Musk fashion promised Tesla will post a quarterly profit during the July-September quarter, a forecast widely lambasted by analysts as unrealistic. Tesla’s troubled 15-year history has been marked by steady losses and expensive investments in technology and manufacturing plants.
Musk holds a 22 percent stake in Tesla, increasing the degree of difficulty for shareholders trying to challenge his authority. After the results were announced, he sought to reassure shareholders attending the meeting and others watching on a webcast.
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