Tesla turns back effort to remove Elon Musk from chairman seat; directors win new terms
A vote to kick Tesla Chairman and Chief Executive Elon Musk out of his chairman’s seat failed at Tesla’s annual shareholder meeting Tuesday. So did a push to reject three board members who were up for reelection to new terms.
The company said the votes failed by a “super majority” but offered no numbers. The final tally will be revealed in government filings within four days, the company said.
CtW Investment Group, which backed the proposals, was quick to respond. “Tesla must release a detailed vote tally as quickly as possible,” CtW Executive Director Dieter Waizenegger said via email. “Given the substantial insider holdings, these results are not a surprise. Only once we have the specifics will it be possible to interpret the expectations of Tesla’s unaffiliated investors.”
Meantime, Elon Musk told shareholders that the troubled Model 3 electric sedan will hit a production rate of 5,000 a week by the end of June. The last several months, he said, were the most “hellish” in his life. A new third assembly line Tesla is building at the company’s Fremont, Calif., plant should help achieve the goal, he said.
While he discussed his own production problems, he also laid into other automakers.
It may sound “cheesy,” he told shareholders, but “we build our cars with love.” Competing cars, he said, are created based on the needs of automakers’ finance and marketing departments with “no soul.”
The sooner Musk can boost production, the easier it will be to try to raise new cash from debt or equity investors to keep the company solvent.
Musk said Tuesday he won’t need to raise “incremental” equity or debt this year. But most analysts say he’ll need billions of dollars more by the end of 2019 to avoid drastically reducing his ambitions for the company. Tesla plans an electric semi truck, a crossover vehicle and a new manufacturing plant in China.
Although Musk said “we don’t want to make an announcement exactly,” he said Tesla will offer details on the new factory “as soon as next month.”
On the vote for directors, James Murdoch, Antonio Gracias, and Kimbal Musk, Elon’s younger brother, won new three-year terms. A nonbinding advisory proposal to depose Musk as chairman failed.
Shareholder activist Jing Zhao had introduced the chairman measure, having maintained that the company is too big to have one person serve as both chairman and chief executive.
CtW, which offers investment advice and services for union pension funds, sought to push out the directors. The group said that Musk and Murdoch — the 21st Century Fox chief executive who also serves on three other boards — are spread too thin.
Musk is famous for his wide array of interests. His roles include chairman and chief executive at Tesla; chairman and chief executive of rocket-maker SpaceX; chief executive of Neuralink, a developer of brain-computer interfaces; and founder of Boring Co., a tunnel transportation company.
Opponents contended that venture capitalist Gracias, officially the board’s lead independent investor, is not really independent, in part because he’s done business with the company.
Musk is under heavy pressure to boost production of the make-or-break Model 3. For years he’d been forecasting an annual production rate of at least 400,000 Model 3s by now. While the company said it is getting its manufacturing act together, only about 8,000 Model 3s were sold in the first quarter of this year.
Although the company sells the luxury Model S and Model X, along with storage batteries and solar power systems, its future depends on high-volume sales of the Model 3. Production has been hobbled by what Musk has conceded as an over-aggressive attempt to automate the company’s Fremont car assembly plant and its battery factory in Sparks, Nev.
“One of the biggest mistakes we made was making things that are super easy for a person to do but super hard for a robot to do,” Musk said Tuesday.
The Fremont plant has suffered labor unrest, and Model 3 owners have complained about a wide variety of quality problems.
Short sellers, investors who bet a company’s stock will plunge, say a failed Model 3 will drive the stock price toward zero.
Plenty of current stockholders disagree. The company’s market value of $49 billion puts it higher than Ford’s. Tesla’s stock price closed down 1.9% on Tuesday, to $291.13, before the vote results and Musk’s comments. In after-hours trading, the shares rose 1%.
The company in May reported that demand remains high for the Model 3, with 450,000 reservations made in the form of refundable $1,000 deposits. On Monday, however, a company called Second Measure that analyzes credit and debit card purchase data estimated that 23% of all Model 3 deposits in the U.S. had been refunded.
Tesla said its own numbers differ but declined to reveal them.
Musk also said body shops are being added to Tesla repair facilities. Tesla online forums are filled with complaints from new owners about body panels that don’t fit.
5:23 p.m.: This article was updated with a comment from CtW Investment Group.
4:25 p.m.: This article was updated with additional information from Elon Musk’s question-and-answer session with shareholders.
This article was originally published at 9:55 a.m.