By Tim Higgins
Tesla Inc. has asked a federal judge to allow the electric-car
maker to reopen its lone U.S. assembly factory, calling a local
government's insistence that it remain closed to fight the spread
of Covid-19 a power grab that defies the U.S. Constitution.
The lawsuit, filed Saturday, followed a new string of messages
on Twitter by a frustrated Chief Executive Officer Elon Musk,
saying he is ready to abandon California as the company's home
after Alameda County officials said Tesla can't resume production
even as the state begins to start reopening.
The Tesla CEO, through Twitter, on Saturday morning said: "Tesla
is filing a lawsuit against Alameda County immediately. The
unelected & ignorant "Interim Health Officer" of Alameda is
acting contrary to the Governor, the President, our Constitutional
freedoms & just plain common sense!"
By the evening the company released details of how it planned to
keep its workers safe, saying it had begun the "process of resuming
operations." It didn't specify when production would restart.
The company filed its suit in the U.S. District Court for the
Northern District of California, seeking an injunction against the
county's order and arguing, in part, that the local government had
overstepped its authority by overruling the California governor's
approval for businesses to reopen.
"Alameda County's power-grab not only defies the Governor's
Order, but offends the federal and California constitutions," Tesla
said in the lawsuit, filed by outside lawyer Alex Spiro.
California Gov. Gavin Newsom on Thursday began detailing how the
state would begin phasing in the reopening of some businesses
starting the following day, including manufacturing. He also said
he supports local communities enforcing stronger shelter-in-place
rules, such as those in the San Francisco area, including Fremont
and Alameda County, where Tesla's factory is located.
Alameda County has reported more than 2,000 cases of people
infected with the Covid-19 virus through Friday, including 71
deaths from the disease.
On Saturday, the county said it has been communicating and
working closely with Tesla's "team on the ground in Fremont,"
noting that it was a collaborative and "good-faith effort to
develop and implement a safety plan that allows for reopening while
protecting the health and well-being of thousands of employees who
travel to and from work at Tesla's factory."
The county added, "The team at Tesla has been responsive to our
guidance and recommendations, and we look forward to coming to an
agreement on an appropriate safety plan very soon."
It didn't respond to a request for comment about the
Tesla initially fought to stay open in March when the local
order was first announced but eventually relented under pressure,
stopping production on March 23. It had hoped to resume
manufacturing on May 4, a day after the shelter-in-place had been
scheduled to be lifted but that order was extended last week
through the end of May, sparking Mr. Musk to call such restrictions
a violation of people's rights and equated them to fascism.
After Gov. Newsom's announcement Thursday about phasing in
businesses, Mr. Musk cheered the news on Twitter. The CEO sent a
memo to his employees saying the factory, which employs more than
10,000 workers and assembles the Model 3 compact car, would resume
work on Friday. But hours later, the public health department of
Alameda County said in a statement that Tesla had been informed
that it couldn't reopen yet.
In the lawsuit, Tesla said that its facilities in Lathrop, which
is part of nearby San Joaquin County, continue to operate, saying
both counties have experienced a similar infection and death rate.
"This disparate treatment is arbitrary and without a rational
basis," the lawsuit said.
Mr. Musk, a frequent user of Twitter, on Saturday said on the
social-media site: "Frankly, this is the final straw. Tesla will
now move its HQ and future programs to Texas/Nevada immediately. If
we even retain Fremont manufacturing activity at all, it will be
dependen on how Tesla is treated in the future. Tesla is the last
carmaker left in CA."
On Saturday, after Mr. Musk's Twitter messages, Fremont Mayor
Lily Mei issued a statement saying it was time for the "county to
engage with our local businesses to come up with acceptable
guidelines for reopening our local economy." The city's police
department has been responsible for enforcing the order
"As the local shelter-in-place order continues without
provisions for major manufacturing activity, such as Tesla, to
resume, I am growing concerned about the potential implications for
our regional economy," the mayor said. "We know many essential
businesses have proven they can successfully operate using strict
safety and social-distancing practices. I strongly believe these
same practices could be possible for other manufacturing
businesses, especially those that are so critical to our employment
Mr. Musk in March said Tesla was seeking a site for a new U.S.
automobile assembly factory in the middle of America, stoking
speculation that Texas might be in the mix. "Incentives play a
role, but so do logistics costs, access to a large workforce with a
wide range of talents, and quality of life," he told The Wall
Street Journal at the time.
Tesla began the year planning to boost deliveries more than 36%,
though last month didn't reiterate the guidance when it announced
its first-quarter results, and said it was too early to say what
the impact of the Covid-19 heath crisis would be on its
In an interview with Joe Rogan's podcast released Thursday, Mr.
Musk called the shelter-in-place orders a violation of the U.S.
constitutional right to assemble. "I don't think these things stand
up in court," Mr. Musk said. "We should be concerned about anything
that is a massive infringement on our civil liberties."
The San Francisco area has won praise for its initial aggressive
action to contain the coronavirus, which in March looked
increasingly threatening to the community. Since then, a national
debate has begun about when communities can open up again. Some
U.S. states have eased restrictions.
Michigan Gov. Gretchen Whitmer on Thursday said auto makers and
parts suppliers in that state could resume operations on Monday.
General Motors Co., Ford Motor Co. and Fiat Chrysler Automobiles NV
plan to resume production on May 18 at plants across North
An extended shutdown in California poses a risk to Tesla's
effort to ramp up production of its latest car, the Model Y compact
sport-utility vehicle, which Mr. Musk has said could overtake the
Model 3 car as its bestseller. The success of the Model 3 has
helped Tesla see rapid growth in the past two years. Tesla
surprised Wall Street when it reported a small first-quarter
profit, the first time in the company's 16-year history that it has
been able to post three consecutive quarters of profitability.
While the company has said it has enough liquidity to weather
the economic uncertainty, having most of its operations shut down
could quickly consume its cash. On Friday, the company announced it
had secured a more than $500 million working-capital loan in China
to help expand its only other assembly plant located in Shanghai,
which opened late last year.
That factory has given Tesla experience dealing with the
coronavirus, Mr. Musk said recently. He noted during the podcast
that none of the company's 7,000 employees in China have died of
"Tesla knows far more about what needs to be done to be safe
through our Tesla China factory experience than an [unelected]
interim junior official in Alameda County," Mr. Musk said
Tesla said its plan to restart operations has been crafted over
months and would ensure worker safety at the factory, including
measures to assure social distancing and extra employee training.
"It was modeled after the comprehensive return to work plan we
established at our Shanghai Gigafactory, which has seen smooth and
healthy operations for the last three months," the company said on
The threat to leave California underscores the pressure Mr. Musk
is under and would mark a sharp shift for the company that built
its image, brand and workforce in the Golden State.
A community of electric-car enthusiasts throughout California
helped seed interest in the then-tiny startup that revealed plans
in 2006 to sell a two-seat sports car. The state's tough emissions
regulations also helped Tesla. An important part of the struggling
company's revenue in its early years came from selling emissions
tax credits. Tesla received them for its electric cars and could
sell them to competitors who lacked the volume of zero-emission
vehicles to avoid state penalties. Tesla's first-quarter profit, in
fact, was largely helped by the sale of such credits, a practice
that has been adopted elsewhere.
The acquisition in 2010 of the Fremont factory, a short drive
from Tesla's Palo Alto headquarters, was a pivotal moment in the
company's history ahead of going public
By making his public threat to leave California, Mr. Musk is
following a similar pressure campaign against government officials
that he has employed when fighting laws or regulations he has
In Texas, which protects franchise dealerships that Tesla
doesn't use, he spent years trying to fight the law, though with no
luck even as he succeeded elsewhere. In such battles with
governments, Mr. Musk has tried to rally support among Tesla fans.
He seemed to be doing the same on Saturday, telling a Bay Area
Tesla ownership group on Twitter to "please voice your disagreement
as strongly as possible with @alamedacounty."
Despite Tesla's battles in Texas, Mr. Musk has shown an interest
in the state. Last week, during a call with analysts, he suggested
that the company might announce plans for its future battery
efforts at an event in Texas later this month. If Tesla moves its
headquarters to the state, the electric-car maker would be joining
Toyota, which decamped from its North America headquarters in
California beginning in 2014.
Write to Tim Higgins at Tim.Higgins@WSJ.com
(END) Dow Jones Newswires
May 09, 2020 23:47 ET (03:47 GMT)
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