Amid a Scramble to Produce Model 3s, Elon Musk Accuses a Tesla Employee of Sabotage

Mel Melcon/Los Angeles Times

In scrambling to ramp up production of its Model 3 electric car, Tesla has run into trouble with robots and automated machinery, a need for more workers and a shortage of battery packs.

Now Tesla’s chief executive, Elon Musk, suspects his company might have a more unusual problem: sabotage.

In an email sent to employees late Sunday night, Mr. Musk said a disgruntled worker had broken into the company’s computer systems in an attempt to disrupt manufacturing.

“I was dismayed to learn this weekend about a Tesla employee who had conducted quite extensive and damaging sabotage to our operations,” he wrote. “This included making direct code changes to the Tesla Manufacturing Operating System under false usernames and exporting large amounts of highly sensitive Tesla data to unknown third parties.”

While it was not clear whether the operations in question were at its assembly plant in Fremont, California, its battery plant near Reno, Nevada, or elsewhere, this new disruption comes as Tesla is racing to streamline operations on the assembly line that produces the Model 3. Mr. Musk is counting on the midsize Model 3 to drive revenue higher, stabilize Tesla’s finances and enable the company to begin generating profits.

He has said Tesla will make money in the second half of the year if it is able to produce 5,000 or more Model 3s a week, a level he predicted would be reached by the end of the month. At the company’s shareholder meeting this month, Mr. Musk said the company had increased its output to about 3,500 Model 3s a week, up from around 2,000 a week in early May.

Tesla seemingly has no shortage of customers ready to buy the car. It took $1,000 deposits from nearly 400,000 people even before it began making the Model 3 last summer. A large portion of those customers, however, were expecting to buy a basic version that is priced at $35,000 but has not yet gone into production. For now, the company is making versions that sell for $50,000 and more.

“What versions they are producing are almost as important as how many they are producing a week,” said Rebecca Lindland, a senior analyst at Kelley Blue Book, an automotive research firm. “They’ve been talking about a mainstream car that anybody can afford, but what they’re making are still luxury cars that most buyers can’t afford.”

Ms. Lindland said she had sent a deposit for a base-price Model 3 but asked for a refund earlier this year when she realized that only the higher-priced versions would be available.

The specter of industrial sabotage adds a strange chapter to the extraordinary, if relatively short, history of Tesla. Defying critics, the company has proved that there is a viable market for electric cars and that they can command premium prices. It has pioneered methods of upgrading cars through software updates beamed over the air, the way iPhones can download operating systems. Taking an approach never tried before, Mr. Musk also built a gigantic factory in Nevada to reduce the costs of battery packs through vast scale.

At the same time, Tesla and its chief have experienced setbacks. At least three fatal accidents have occurred in the United States involving Tesla vehicles that were operating with the company’s Autopilot driver-assistance system engaged, drawing scrutiny from federal safety officials and raising questions about the system’s reliability. Mr. Musk also overestimated Tesla’s ability to mass-produce the Model 3; he once expected the company to churn out several hundred thousand in 2018.

While Tesla’s share price has made it more valuable than Ford and close behind General Motors, its shares were down almost 5 percent Tuesday.

Tesla-against-the-world

One constant since Tesla was founded in 2003: The company has lost money every year. Tesla has several times raised money from investors to develop its cars and put them into production, and some analysts are concerned because the company must begin paying back some debt later this year.

Earlier this year, Moody’s Investor Service cut Tesla’s credit rating, noting that it could face a cash crunch if it failed to hit its Model 3 production targets. Just last week, Mr. Musk announced that Tesla was eliminating the jobs of about 3,500 people to cut costs.

In his email reporting sabotage, Mr. Musk seemed to stoke the notion that enemies of Tesla were working against it.

“As you know, there are a long list of organizations that want Tesla to die,” he wrote. “These include Wall Street short-sellers, who have already lost billions of dollars and stand to lose a lot more.” He also pointed to oil and gas companies, which, he said, “don’t love the idea of Tesla advancing progress of solar power & electric cars.” Of rival automakers, he added that “if they’re willing to cheat so much about emissions, maybe they’re willing to cheat in other ways?”

The employee thought to have harmed Tesla’s manufacturing system was not identified in the email, but Mr. Musk said the worker had admitted trying to damage the manufacturing system and was unhappy with the company after being passed over for a promotion.

The email was first reported by CNBC. A Tesla spokesman declined to discuss the content of Mr. Musk’s emails.

In a separate email to employees Monday, also reported by CNBC, Mr. Musk said a minor fire had broken out on the assembly line at its Fremont plant, halting production for several hours. He said it “could be just a random event” but added that it was “hard to explain” and urged employees to keep an eye out for any suspicious activity inside the company.

“This is when outside forces have the strongest motivation to stop us,” Mr. Musk wrote.

The billionaire tech entrepreneur has long advanced a viewpoint of Tesla-against-the-world, helping build his upstart car company’s reputation as a nail in the tire of Big Auto. But Mr. Musk’s latest wave of conspiracy thinking – coming within days of similar attacks on labor unions and journalists – has surprised even long-time Tesla watchers.

“He’s always been combative,” said Mike Ramsey, an automotive research director at Gartner, the advisory firm. But “the public displays of paranoia have become increasingly odd. To me, they seem to reflect a level of anxiety or pressure that I haven’t seen recently.”

That pressure has also seeped into the company’s 10,000-employee car factory in Fremont, California. Though Tesla has said it wants it “to be the safest factory on Earth,” three factory workers told The Washington Post that they worried the accelerated Model 3 demands could compromise the cars’ safety and lead to more injuries and worker burnout.

“We’re a NASCAR pit crew,” said one worker, who declined to be named because he feared retaliation. “We’re doing this at the speed of light.”

One worker said he was afraid to raise his concerns with his supervisor amid ongoing Tesla layoffs. The company declined to comment.

California’s Division of Occupational Safety and Health, or Cal/OSHA, has opened two active investigations into Tesla, one of which involves a 30-year-old worker who was taken to the hospital after a piece of factory equipment broke his jaw. Those investigations are ongoing, the agency said Tuesday.

SOURCE: The New York Times – Neal E. Boudette; The Washington Post contributed.