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Breakingviews – Tesla charge resting in board hands



NEW YORK (Reuters Breakingviews) – Elon Musk's failed readiness to accept has affected his credibility – and could lead to a lawmaker's conviction. Getting the $ 53 billion company back on the road demands more driving pleasure from its casual directors. Breakingviews introduces the advice that a consultant could give Tesla's board.

Tesla Model 3s are shown in an underground car park next to a Tesla store in San Diego, California, USA, May 30, 2018. REUTERS / Mike Blake

To Tesla's Independent Board Members,

After Elon After giving up his plan to take Tesla privately last week, you asked our company to switch and seek advice on a potential deal, what the company should do next. Below you will find our first results.

The most relevant lesson of the Buyout Brouhaha – and, frankly, incidents such as Elon calling one of the players who rescued the Thai boys football team pedophile is that you have to be a much more active and dedicated board , This does not mean that you should put on all overalls and hit the factory floor, wrench and torque wrench in your hand.

It's more time to get your house – and Elons – in order. Let's start with the blackboard. It is perceived as too close to Elon. Only three of you have no other connections to him. They put Brad Buss, the chief financial officer of SolarCity, on the special committee to rate each Elon offer. And Elon and your main director, Antonio Gracias, are going back a long way. We strongly recommend that you consider making someone else the CEO.

You do not like it either. For example, you kept silent about his Thai "Pedo" tweet. And you've been waiting more than a day to publicly announce the end of a buyout bid, so Elon has been able to commission his own comments. And then you made it look as if you wanted to bury the news by releasing it in New York just before midnight. On a Friday. All this reinforces the perception that you are too close with Elon.

You can change that by addressing his weaknesses properly. First, we recommend that you concentrate. It may be good for morale to see the boss help in the factory floor, but it diverts his attention away from running the business. His emotional interview with the New York Times is just the final proof that he has spread too thinly.

Ideally, you should urge him to give up his leadership roles at SpaceX and the Boring Co. – or at least go on vacation until Tesla's "production hell" is over and the company is solidly profitable. Hiring a Chief Operating Officer, as SpaceX did, would also help.

Speaking of goals: We continue to suggest that you force Elon to lower its production targets. He has too often promised too much and delivered too little. This not only contributed directly to his poor state of mind. It also helps to cause quality problems with new models 3, and there is a shortage of spare parts and service times for those who are already on the road. They even have reporters and short sellers who are sometimes armed with drones and are monitoring the factory outlets because the production of the evidence has slowed down.

He also has to take back his financial forecasts. Maybe Tesla will be sustainably profitable in the second half of the year. But the company has burned $ 1.8 billion so far this year, has only $ 2.2 billion in cash and $ 1.1 billion in debt due in March.

It will probably be necessary to improve cash generation by $ 3 billion by the end of December to avoid catastrophe. But instead of raising capital to cover potential losses, Elon played a dangerous chicken game in 2018.

Many shareholders may be more than willing to help when they return to profitability. That was at least a positive takeover from the buyout fiasco. Of course, this presupposes Tesla's ability to sell more shares – or bonds – while the Securities and Exchange Commission examines Elon's twins on "funding."

These could be targets included in his compensation package with the fact that all Tesla-related tweets have exceeded compliance and his factory hours have been reduced. But with Elon, it could be more effective just threatening him as CEO.

Sure, lowering goals and raising capital can fill up the stock. But even if it were halved, Tesla would still trade 17 times the profit of 2020 – far higher than any major automaker. And if these measures help to make the company and Elon more reliable, it should only be a hit on the road. Sincerely,

Phil R. Upp

Ere, Wego, Agin Advisors, LLC

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