Did Elon Musk Mislead Fox About Problems At Tesla?

A couple of weeks ago, Fox Business anchor Liz Claman made her annual visit to Silicon Valley to interview local CEOs. One of the exclusives she scored was an interview with Tesla co-founder Elon Musk.

In listening to that interview, it would be easy to conclude that everything at Tesla was hunky dory. In fact, better than that. Musk said they were doubling production from 40 to 80 cars per week. That they were hiring like crazy. And he even discussed the growing short position on Tesla and its stock, insisting:

“It’s doing pretty well actually given that we’re such a huge short position. In fact I think the short position may be as high as one can actually go. They literally hit the ceiling on the short position. The shorts are in it to the hills. I think it is very unwise to be shorting Tesla, it’s very unwise. There is a tsunami of hurt coming for the short.”

Tough talk. But it’s also an outlook that seems hard to square with revelations this week that Tesla has hit some serious bumps in the road. According to this story about a startling securities filing from Tesla, Dana Hull reports:

Tesla Motors (TSLA) on Tuesday quietly cut its revenue forecast for 2012 and admitted that production of its all-electric Model S sedan is ‘slower than we had earlier anticipated.’ “

Of course, that news sent Tesla’s stock spiraling down this week, from $30.66 to $27.54 on Wednesday. (Though it’s recovered a bit Thursday). Still, it seems the shorts were right, and Musk was wrong.

But how could he be wrong? Did Musk not know, just two weeks ago that things at Tesla were getting seriously off track? Or did the problems not become clear until just this week, forcing the company to make the disclosure?

It’s hard to believe the problem just popped up. Hull writes:

“Tesla had previously vowed to make 5,000 cars by the end of this year. But in its latest filing with the Securities and Exchange Commission, it revealed it is “four to five weeks behind our previously announced Model S delivery goals” due to delays by suppliers and the need to continue to train employees. The company now says it expects to deliver 200 to 225 Model S vehicles to customers in the third quarter and 2,500 to 3,000 Model S vehicles in the fourth quarter.”

Musk didn’t address the 5,000 car goal in the interview, and Claman didn’t ask about it specifically. But the 80 cars per week that Musk referenced means that the company would be on track to build 960 cars in the last 12 weeks of the year. To hit the 2,500 mark, the company would have to more than double that rate to at least 200 cars per week.

Is that realistic? Actually, it’s even tougher than that. Because Tesla can’t get to 200 right away, it will have to produce many, many more more by the end of the quarter to hit that mark. Hull writes:

“It said it produced 77 cars in the week ending Sept. 23 but needs to ramp up to 400 cars per week before the end of 2012.”

To deal with the issue, the company said it is working with suppliers to get more timely deliveries of parts. It’s hiring like crazy, but of course, training takes time. And the company now says it will need to issue more stock to increase its cash cushion.

But perhaps the part that makes me the most nervous is that the company is having to renegotiate its payment schedule with the U.S. Department of Energy on its loan.

So, did Musk mislead Claman in that interview? His rosy view certainly seems at odds with what we now know. Perhaps, one could argue, she just didn’t ask the right, specific questions. Perhaps, he masterfully spun what was a deteriorating picture.

At the same time, the company made a big announcement this week about the Supercharger stations it was rolling out. And then very quietly the next day filed that document revealing its challenges with the U.S. Securities and Exchange Commission.

Whatever the case, I’m willing to bet there are a lot of shareholder lawyers out there sharpening their pens, and parsing his words very, very closely.

Here, by the way, is the clip: