Sheriff Quashes Elon Musk's Aim to Keep Tesla Production Humming--Update
March 18 2020 - 10:41AM
Dow Jones News
By Tim Higgins
Tesla Inc. shares fell sharply Wednesday after the sheriff's
office in the county home to the company's California car factory
said the auto maker must halt production, putting a break on CEO
Elon Musk's plans to work in spite of statewide efforts to mitigate
the effects of the novel coronavirus pandemic.
The Silicon Valley auto maker had continued to make vehicles at
its Fremont factory a day after counties in the San Francisco area
issued an order to shut down nonessential business to get people to
shelter at their homes.
Instead of continuing production, the auto maker must conduct
"minimum basic operation only," Alameda County Sheriff spokesman
Raymond Kelly said in an email sent to The Wall Street Journal on
Tuesday.
His email followed a tweet by the sheriff's office declaring
Tesla as "not an essential business as defined" in the order.
Tesla shares fell more than 9% early Wednesday, outpacing
broader market declines. The stock had already retreated more than
50% from its February high amid growing investor concerns about the
impact of the Covid-19 outbreak on businesses. The Nasdaq was off
almost 30% over that period.
The directive could threaten Tesla's plan to boost deliveries by
more than 36% this year, fueled in part by a new factory in China
and the arrival of the Model Y compact sport-utility vehicle. On
Monday, Tesla announced deliveries had begun of the Model Y, which
is being made in Fremont.
In an email to employees Monday, Mr. Musk said the harm from the
panic over the novel coronavirus is more dangerous than the actual
disease.
Still, he wrote, "I'd like to be super clear that if you feel
the slightest bit ill or even uncomfortable, please do not feel
obligated to come to work."
"I will personally be at work, but that's just me," he added.
"Totally ok if you want to stay home for any reason."
For Tesla, managing the public health crisis has become a tale
of two factories. When the novel coronavirus threatened China
earlier this year, the auto maker had to close its new Shanghai
factory as part of an effort there to contain Covid-19.
The directive issued by the local sheriff Tuesday came about 24
hours after an Alameda County public health department spokeswoman
said the Fremont factory wouldn't have to shut.
Under the terms of the order, minimum basic operations cover
only such work needed to maintain the value of a business's
inventory, ensure security, process payroll and employee benefits,
facilitate remote working or "related functions."
Tesla didn't respond to requests for comment on the company's
plans.
Tesla's decision to stay open has drawn scrutiny, including from
Robert Reich, the former secretary of Labor under the Clinton
administration. "Food might be essential, but not Teslas," he said
on Twitter. "Subjecting 10,000 workers to this pandemic is
shameful."
Other U.S. auto makers are also facing pressure to follow the
lead of European factories and shut down amid the health scare.
While Tesla's cash pile was strengthened in recent weeks with
the issuance of more than $2 billion in new shares, a prolonged
shutdown could still threaten Tesla.
Morgan Stanley estimates Tesla has enough cash to weather
revenue falling 90% for a full three months. In such a case, the
bank estimates, Tesla would burn about $800 million in cash a
month. According to its estimates, Tesla has about 14 months of
cash it could burn through.
Ian Lovett contributed to this article.
Write to Tim Higgins at Tim.Higgins@WSJ.com
(END) Dow Jones Newswires
March 18, 2020 10:26 ET (14:26 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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