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Column: Does Elon Musk need California more than California needs Elon Musk?

Tesla's Elon Musk has resisted a coronavirus shutdown order.
(Jerome Adamstein / Los Angeles Times)

Tesla Chief Executive Elon Musk did a big favor this weekend for anyone looking for a fresh source of entertainment to supplement whatever’s showing these days on Netflix or Amazon Prime.

He did so by staging a massive conniption via Twitter aimed at Alameda County, Calif., which moved to block the reopening of Tesla’s electric vehicle manufacturing plant despite a coronavirus-related shutdown order.

Musk called the shutdown order the “final straw” in his months-long conflict with the county, announced his intention to move the plant to Texas or Nevada, and filed a federal court lawsuit challenging the shutdown.

We don’t need callous billionaires with little regard for workers telling us what to do right now.
Former Labor Secretary Robert Reich
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He capped it all by announcing Monday that he would resume manufacturing at the plant despite the order. Reports from the site indicated that operations actually resumed over the weekend.

All this gives rise to an essential question: Does California need Musk more than Musk needs California? The question was answered in the negative by state Sen. Lorena Gonzalez (D-San Diego), a strong advocate for employee rights who tweeted a profane message to Musk in reply to his tweetstorm.

Other worker advocates pointed to Tesla’s record of flouting federal labor law through anti-union activities and allegedly recurrent worker safety problems at the Fremont plant. A report by Forbes last year calculated that the plant racked up about 2 1/2 times as much in safety fines in 2014-18 than 10 larger auto plants put together.

“We don’t need callous billionaires with little regard for workers telling us what to do right now,” former Labor Secretary Robert Reich, now a professor at UC Berkeley, tweeted Monday. “Don’t let them put their own profit over people’s lives during a pandemic.”

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On the other hand, Tesla employs 10,000 manufacturing workers at Fremont and has been in the forefront of the auto industry’s move toward electric vehicles, which makes it an enterprise to be reckoned with.

Will Alameda County have the gumption to challenge Musk’s flouting of rules designed to keep workers safe from the coronavirus and reduce the chance that infected employees could spread COVID-19 in the community? It won’t be an easy call — Musk has challenged local authorities to arrest him personally if they think Tesla is breaking the law, which sets up a nice photo opportunity for him.

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That’s a bold step and may be easier to comprehend if we place it in the context of, well, Musk.

To review recent history, starting roughly from the present and moving backward, he’s been a coronavirus skeptic. On April 29, during Tesla’s first-quarter earnings call, he lashed out at shelter-at-home orders as “fascist.” On March 6, he had tweeted that the “coronavirus panic is dumb.”

In other March tweets, Musk touted the antimalarial drug chloroquine as a possible treatment for COVID-19 — so far, the drug and a related compound have been flops — and asserted that children are “essentially immune” from the virus, which is absolutely false.

The current dust-up with Alameda County authorities replicates a conflict between Musk and the county at the outset of the lockdown, when he refused to shut the Fremont factory for the better part of a week after Bay Area counties issued a comprehensive stay-at-home order. Musk initially insisted that the factory qualified as an “essential business,” but relented and acceded to the shutdown on March 23.

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So is Musk’s threat to move Tesla manufacturing and headquarters out of California and over to Nevada or Texas even credible? The company might save considerably in state income taxes, but any such move wouldn’t be easy or inexpensive.

As industry analyst Dan Ives of Wedbush Securities observed to investors, moving out of Fremont would take as long as 18 months and “could add risk to the manufacturing and logistics process in the meantime.” The chore would involve relocating many of Tesla’s 10,000 Fremont workers and finding replacements in the new location. That would require months of training for the newcomers, which would slow production, and could require relocation stipends. Should he opt to move engineers far from Silicon Valley, recruiting might not prove easy.

One shouldn’t forget that wherever its vehicles are manufactured, Tesla’s most important domestic market is California, which accounts for almost half of all sales of the company’s mass-market Model 3. There’s value in Tesla being located in its prime market rather than having to ship its products as much as halfway around the country.

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Not a few Musk tweetbursts, of course, have proved to be mostly for show. The best example is his infamous tweet of Aug. 7, 2018, in which he claimed to be “considering taking Tesla private at $420" and asserted, “funding secured.” The latter statement was plainly untrue and the former dubious.

Followers of Elon Musk must have known that the Tesla chairman and chief executive’s controlled performance during the company’s Aug. 1 earnings conference call — in which he apologized for insulting two Wall Street analysts on an earlier call and generally kept his emotions in check — wasn’t sustainable.

The tweet has cost Musk and Tesla dearly, through a lawsuit filed by the Securities and Exchange Commission and another by investors claiming that the tweet cost them billions of dollars in market losses. A federal judge cleared the shareholder lawsuit to move ahead on April 15.

Meanwhile, Tesla is still failing to make a profit from manufacturing cars. Although the company has booked a profit in each of the last three quarters, through March 31, the profit has largely been due to Tesla’s sale of regulatory credits to other companies striving to meet low-emission regulations.

Revenue from those credits came to $354 million in the quarter ended March 31, when the company reported an overall profit of $68 million.

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Musk’s reaction to Alameda County’s latest enforcement effort is classic Musk. In a Friday tweet, he attacked the county’s health officer as “unelected & ignorant.”

She’s Erica Pan, an expert in pediatric infectious diseases with an appointment as a clinical professor at UC San Francisco, one of the nation’s premier medical schools. Yes, she’s “unelected,” but she was appointed by the elected officials of the county. (Blaming “unelected” bureaucrats for regulations one doesn’t like comes right out of the rule books written by the oil and tobacco industries.)

Musk asserts that the county’s action is, as he tweeted Friday, “absurd & medically irrational ... in violation of constitutional civil liberties,” but his dudgeon does not in itself make a constitutional, much less medical, case.

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Tesla’s lawsuit asserts that the county is acting in violation of reopening orders laid out by Gov. Gavin Newsom, but that order gives local officials some latitude to apply more stringent reopening standards where appropriate.

The lawsuit also claims that Tesla is an “essential” business, largely by bootstrapping a number of definitions of such businesses together. For example, the rules say businesses installing electric vehicle charging systems are permissible, as are the manufacture of “distributed energy resource components, like solar panels.”

The closest the lawsuit comes to citing any rule expressly permitting the manufacture of electric cars is a reference to a federal listing of 16 “critical infrastructure sectors” including “transportation equipment manufacturing” including “vehicles and commercial ships manufacturing.”

Is that enough? Who knows? A judge might decide, but it’s unlikely a conclusion would come as early as May 18, when the county was reportedly prepared to let Tesla reopen anyway. (The county’s shutdown order formally lasts to May 31.) In other words, Musk has erected a legal edifice claiming “deprivation of liberty and property” in violation of his rights of due process upon a disagreement over as few as six days of forbearance.

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This isn’t the behavior of a CEO of a major manufacturing enterprise. It’s the behavior of a child.

But that underscores the conundrum of Tesla, the company. It’s one of the most widely followed firms in the world, even though its manufacturing output barely ranks in terms of its share of the auto market. The company’s share price is arguably so dependent on Musk’s personal following that his absence might crater the company.

But his reaction to the coronavirus just shows the uglier side of his role. It suggests that his desperation to get production moving again has melded in with a paranoid streak (among his previous targets: short sellers and the SEC) to work against the company’s interests. Just think about how much better off Tesla might be in its quest to reopen production if its boss acted like a grown-up.


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