(Bloomberg) -- The Tesla Inc. management ranks that Elon Musk told employees he’s “flattening” had already been raising eyebrows by how quickly it was thinning out.
Musk announced a “thorough reorganization” in a memo to employees Monday, saying Tesla was changing its structure to improve communication, combine functions and get rid of activities that aren’t “vital to the success” of the company’s mission. Last week, a spokesman confirmed one of only four executive officers named in the company’s recent proxy statement was taking time away from the company to “recharge.”
While Musk, 46, has said the “short burn of the century” is coming soon to investors betting against Tesla, he’s rapidly losing top deputies to help him deliver on that prediction. Famed investor Jim Chanos, one of the most vocal Tesla short sellers, maintains a list of executive departures that he calls “stunning.” The turnover is comparable to what his firm Kynikos Associates Ltd. observed at Valeant Pharmaceuticals International Inc. and Enron Corp. -- two wildly successful short bets.
“It is never a good sign when almost all your senior executives are leaving with the stock price at a high,” Chanos said on “Masters in Business,” a Bloomberg Opinion podcast released last week. “That’s telling you there’s something wrong. And I don’t know what it is, but almost all the senior executives at Tesla see something and are leaving stock option packages on the table.”
Tesla shares fell as much as 2.5 percent as of 2:25 p.m. in New York and are down about 5 percent this year.
Doug Field, senior vice president of engineering, is taking a break to regroup and spend more time with his family but hasn’t left the company, according to the spokesman. His sabbatical is significant: Musk has said he regards Field as “one the world’s most talented” engineering executives.
That news coincides with a broader exodus of top executives, including Matthew Schwall, Tesla’s primary contact with U.S. regulators, who just joined the safety team at Waymo, the self-driving-car company started by Google. Jim Keller, the head of the driver-assistance system Autopilot, left last month for Intel Corp. In March, Tesla confirmed two of its top financial executives had parted ways, and in February, sales chief Jon McNeill defected to Lyft Inc.
During his contentious earnings call with analysts early this month, Musk alluded to a restructuring of the company that would take place this month to help the company earn a profit and positive cash flow in the third quarter. The chief executive officer didn’t give details of the reorganization in his memo Monday.
Tesla is valued similar to General Motors Co. despite selling a fraction as many vehicles and burning through billions in cash. While the electric-car maker’s stock has been a popular pick to bet against for some time, the number of shares being sold short exceeded 40 million for the first time earlier this month, according to S3 Partners LLC.
‘Divide & Conquer’
Field, 52, is stepping away from his job just weeks after Musk confirmed a report by The Information that the CEO had taken over production of the critical Model 3 sedan from his top engineer. Musk, 46, tweeted last month that he had asked Field about a year earlier to manage both engineering and production to better align the two departments, but wrote that recently, it was “better to divide & conquer.”
During his tenure at Tesla, Field has collected at least $908,000 in salary and has sold roughly $2.85 million worth of shares, according to regulatory filings. He has unvested stock awards worth about $8.3 million, based on Friday’s close in New York, and 60,000 stock options that are currently underwater.
Tesla’s efforts to mass manufacture an electric car for the first time has vexed the company for months. Field made headlines by rallying the ranks in March with an email urging workers to “prove a bunch of haters wrong” by boosting Model 3 output.
The carmaker came up short of a target to build 2,500 Model 3 sedans in the final week of that month. On April 3, the company reported that it produced 2,020 in the previous seven days.
Some of the blame for the slower-than-expected manufacturing lies with Tesla applying too much automation to its production of batteries and cars, according to Musk. The company has temporarily turned to semi-automated or manual processes while it works out the kinks.
Tesla also will continue to hire “rapidly” to support future product development and Model 3 output, Musk wrote in his memo. It’s holding a “hackathon” to fix the two worst production bottlenecks that have hamstrung production thus far.
©2018 Bloomberg L.P.