Tesla Motors to Cut Staff, Delay Vehicle

By REBECCA SMITH

Tesla Motors Inc., the Silicon Valley electric-car start-up, said it is cutting staff and delaying the introduction of its second battery-powered vehicle, the Model S, until 2011, a move that reflects tougher financial markets.
In an additional change, Tesla chairman Elon Musk, one the firm's chief financial backers, said he would assume the post of chief executive, replacing Ze'ev Drori, who served less than a year. Mr. Drori will stay on as vice chairman.
In a blog posting on Tesla's Web site, Mr. Musk said the effects of the global financial crisis "are only beginning to wind their way through every facet of the economy...and this is especially true for Silicon Valley."
He said Tesla would focus on its roadster model, introduced in 2006, and on sales of its electric power train; it will delay additional costly engineering and design work on its next model until it has secured funding. The company is seeking a federal loan guarantee that would allow the firm to get a low-cost loan to cover most of the Model S program costs. Mr. Musk said he expects federal loan approval by the middle of 2009.
The five-seat Model S was to have been assembled at a new production facility in San Jose, Calif., to be built with the help of concessions from the state such as a waiver of sales tax on equipment. The Model S sedan was to have carried a base price of about $60,000, far less than the $109,000 base price of the roadster that is being produced today.
Mr. Musk, the multimillionaire co-founder of PayPal, sought to reassure the firm's customers that the company is not in danger of failing. He said Tesla is "not far" from being profitable and that "even if that threshold ends up being further than expected, I will do whatever is needed to ensure that Tesla has more than sufficient capital."
The company, named for Serbian electrical genius and radio inventor Nikola Tesla, intended to begin with an annual production of 15,000 units of the Model S, rising to 30,000.
Write to Rebecca Smith at rebecca.smith@wsj.com