Tesla’s stock price has fallen nearly 24% in the last month, with the majority of the decline occurring this week. The drastic change isn’t really attributable to a single factor. The company is under pressure across the board, from Model 3 production, Solar Roof delays, concerns of a cash crunch, and delays in Autopilot’s Full Self-Driving capability.
While there isn’t one solution to solve all of Tesla’s growing pains, hiring a Chief Operating Officer could help bring some operational stability to the company while curbing any overpromises made to customers and investors.
Elon Musk has been the CEO of Tesla for the past 9.5 years, and with a newly approved multi-billion dollar compensation plan, signs point to Musk taking the reins for at least another 10 years. However, Musk isn’t committing solely to Tesla as he’s also the CEO and CTO of SpaceX, CEO of Neuralink, CEO of The Boring Company, and one can argue that he’s also a full-time Twitter persona.
In his other companies outside of Tesla, Musk has a key executive running the business operations. President and COO Gwynne Shotwell joined SpaceX as the 11th employee in 2002 and has turned Musk’s passion for Space into a business with over $12 billion in order contracts.
Although Tesla has nearly six times more employees than SpaceX, the young space company operates efficiently and akin to a well-oiled machine, according to employees working at SpaceX. Yet, at the same time, Tesla has seen high executive turnover, as Musk holds tight control of the company’s day-to-day management.
Tesla’s need for a “Shotwell Equivalent” is more apparent than ever and for these key reasons:
- Model 3 Production: Bloomberg’s Model 3 production tracker shows that they are below 50% of their end of March production rate target. Musk should have never increased production targets on the vehicle and needed to be far more conservative with his estimates.
- Continuous delays with Autopilot technology: After ditching Mobileye’s technology in autopilot systems 21 months ago, Tesla’s development of the technology has slowed significantly. Musk first said that a Tesla would be able to drive coast-to-coast autonomously by the end of 2017, that has now been moved to mid-2018.
- Need to capitalize on Model S and Model X. Tesla has built a high-margin business out of their Model S and Model X vehicles. At current production rates, the company can generate $2.5 billion in free cash flow from those two vehicles alone. Tesla should use strategic marketing to boost demand for the vehicles, allowing the company to bring in more high-margin revenue.
- Acquisition of SolarCity: Tesla’s acquisition of solar installation company, SolarCity, has failed to provide meaningful value to shareholders. From the outside, it appears as though Tesla’s management team doesn’t have the bandwidth or cash to grow the Solar division. Both of Musk’s cousins Peter and Lyndon Rive have left Tesla after the acquisition to “focus on other projects”.
It would be foolish to think that a COO would solve all of the company’s issues, but having a dedicated executive to manage day-to-day operations could certainly help in preventing executive turnover while keeping employees focused on Tesla’s core mission: to accelerate the world’s transition to sustainable energy.
Who could be Tesla’s new Chief Operating Officer?
I’ve prepared a shortlist of executives that could potentially land themselves as Tesla’s first COO.
1. Mike Sievert (COO of T-Mobile US)
While Sievert doesn’t have automotive experience, he does bring strong experience managing a large employee base and has worked in the technology sector for the past 25 years. Sievert joined T-Mobile in late 2012 as CMO and became COO in 2015. Since joining T-Mobile, Sievert has been crucial to the company’s successful turnaround. And to boot, Sievert has experience working with outspoken CEOs who also moonlight as a Twitter personality.
2. Julia Steyn (VP Urban Mobility at General Motors and CEO of Maven)
Steyn joined General Motors in 2012 as VP of Merger and Acquisitions and became the VP of Urban Mobility and CEO of GM’s Maven division in late 2015. She has led the company’s initiative into car-sharing with the Maven division and has played a key role in GM’s moves into autonomous vehicles. Prior to joining GM, Steyn was VP at Alcoa, one of the world’s largest aluminum suppliers. She also spent 7.5 years at Goldman Sachs as VP of the Global Natural Resources Group in the Investment Banking division.
3. Alicia Boler Davis (EVP, Global Manufacturing and Labor Relations, General Motors)
Boler Davis has spent the last 24 years at General Motors in a variety of capacities and became EVP of Global Manufacturing and Labor Relations in 2016. She oversees over 150,000 employees in the manufacturing division of GM across 150 different facilities. Prior to her current role, she was SVP of Global Connected Customer Experience where she played a role, like Julia Steyn, in GM’s expansion into car-sharing and autonomous vehicles. Her extensive engineering and managerial experience at GM could bring more order and stability as the company plans to expand production across the globe.
Obviously, this list isn’t comprehensive but should provide a starting point for potential hires. Who do you think should be hired as the first Chief Operating Officer at Tesla?
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This is what Scully said about it in 2013: Sculley said he didn't have the business expertise at the time to fully understand what visionary leadership was. "What would have happened if we hadn't have had that showdown?...I did not have the breadth of experience at that time to really appreciate just how different leadership is when you are shaping an industry," Sculley said, "as Bill Gates did or Steve Jobs did, versus when you're a competitor in an industry, in a public company, where you don't make mistakes because if you lose, you're out."
Musk may be over optimistic. He over promises. He ignores bottlenecks that hamper turning vision into reality. I spent most of my career hobnobbing with powerful corporate executives. Let me tell ya, the "professionals" ain't all dat. Musk may be maddening at times, but his vision is why Tesla exists. Be careful what you ask for... ask Apple.
In 1984, Apple's board of directors, fed up with Steve Job's mercurial personality, forced him to bring in "professional manager" John Scully from Pepsico. Scully and Jobs immediately clashed over how to market the Macintosh. Scully went to the board, they agreed and Jobs was sent into exile. Scully and his successor, after he was ousted, professionally managed Apple to the brink of bankruptcy. The desperate Apple board brought Jobs back and the rest is history.
This is what Scully said about it in 2013: Sculley said he didn't have the business expertise at the time to fully understand what visionary leadership was. "What would have happened if we hadn't have had that showdown?...I did not have the breadth of experience at that time to really appreciate just how different leadership is when you are shaping an industry," Sculley said, "as Bill Gates did or Steve Jobs did, versus when you're a competitor in an industry, in a public company, where you don't make mistakes because if you lose, you're out."
Musk may be over optimistic. He over promises. He ignores bottlenecks that hamper turning vision into reality. I spent most of my career hobnobbing with powerful corporate executives. Let me tell ya, the "professionals" ain't all dat. Musk may be maddening at times, but his vision is why Tesla exists. Be careful what you ask for... ask Apple.
100% agree with this. Tesla is a fairly new company in the grand scheme of things. It’s just going through a rough patch. Don’t throw more people into the mix when you have a more than capable person.
But I am forgetting! "Tesla is not a car company - it's an innovative tech company, dufus!"
1. He needs to sell some of his ownership in Space X as a way to deal with both the Tesla Debt obligations and upcoming capital needs,
2. Create a separate company with separate IPO funding for the Tesla Semi project. This is a very important project that has huge profit potential if there is adequate financial resources to develop and manufacture these trucks and drive trains. He doesn’t have the capital to do it himself.
3. Abandon the Model Y for a while—he doesn’t have the money to peruse it. Revise the Model 3 design to include a hatch back and s higher roof to look more like an SUV. This could just be a sheet metal variation and would increase the potential demand for this vehicle. Manufacture this variation every other week or on a night shift t so that it is possible to increase production numbers without needing a new separate plant which he doesn’t have money or space for. THE front seats, the front part of the car and the drive train would not need to change. I am certain that the combined creative genius of Franz von Holzhausen and Elon can accomplish this if they put their mind to it.
4. Create a new debt obligation vehicle and direct it to existing Tesla owners. I do not want Tesla to go bankrupt with the resultant effects on technical support and warranty support. I love the car and it has been perfectly reliable.
5. Continue full speed ahead with the new autopilot software. This needs to be fixed soon
