Tesla 'quite likely' to meet Model 3 goal; Musk remains chairman
SAN FRANCISCO (Reuters) - Tesla Inc Chief Executive Elon Musk said on Tuesday that a goal of building 5,000 Model 3s per week by the end of June was “quite likely” as the company’s production lines were now demonstrating the ability to build 3,500 vehicles per week.
“This is the most excruciating hellish several months I’ve ever had... but I think we’re getting there,” Musk said during Tesla’s annual meeting of stockholders in Mountain View, California.
Musk’s comments came after shareholders re-elected three directors and voted against a proposal to wrest the chairman role from Musk. That had represented the strongest challenge yet to Musk’s grip on the Silicon Valley electric vehicle maker, which also faces production setbacks and expectations by many analysts that it will need to raise new cash.
Shares rose 1 percent after hours.
Musk choked up after taking the microphone to talk about the company onstage in front of investors.
“At Tesla we build our cars with love,” Musk said, visibly moved. “At a lot of other companies, they’re built by marketing or the finance department and there’s no soul. We’re not perfect but we pour our heart and soul into it and we really care.”
Tesla has been struggling to ramp up production of its new Model 3 sedan, which is crucial to the company’s long-term profitability. Manufacturing bottlenecks have delayed the delivery of vehicles to customers and deferred much-needed revenue as the company continues to spend heavily on Model 3 production fixes, as well as projects in the pipeline.
The company has been engaging in so-called “burst builds,” temporary periods of full-scale production. Tesla then extrapolates the number of cars built during these short-term burst builds over a longer time period.
Analyst Brian Johnson of Barclays warned investors in March to be wary, however, of brief “burst rates” of Model 3 production that were not sustainable.
Musk, who has insisted the company will not need to raise money this year, has also come under fire for his behavior during an earnings conference call last month, in which he cut off analysts posing financial queries, rejecting them as “boring, bonehead questions.” Shares fell as much as 7 percent after Musk’s snub, evaporating $2 billion from Tesla’s stock market value.
He repeated his assertion that the company was not planning on raising additional debt or equity, without providing a timeframe, and said he expected positive net income and cash flow in the third and fourth quarters.
Musk told investors that an announcement about a China factory would come “really soon.” The factory would be in Shanghai, and Tesla was currently in talks with the Chinese government, an executive said.
CORPORATE GOVERNANCE
Arguing that the sprawling company has become difficult to oversee, one investor proposed splitting the chairman and chief executive jobs, both of which Musk holds. Musk owns a 20 percent stake in the company.
Union-affiliated investment adviser CtW Investment Group had rallied shareholders to reject three Tesla directors it says lack qualifications or independence, including investor Antonio Gracias, Tesla’s lead independent director; James Murdoch, the CEO of Twenty-First Century Fox Inc; and sustainable food executive Kimbal Musk, Elon Musk’s brother.
Proxy firms Glass Lewis and Institutional Shareholder Services (ISS) and activist investor CtW Investment Group had supported separating the chairman and CEO roles and mostly opposed the three directors, the only ones up for election this year.
Tesla had recommended shareholders leave Musk with both top jobs and argued the directors are qualified.
Shares of Tesla are down nearly 8 percent from the beginning of the year and down 25 percent from a year high of $389.61 in September.
Reporting by Alexandria Sage and Noel Randewich in San Francisco; Editing by Lisa Shumaker
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