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Tesla's Musk plans 'thorough reorganization'


May 14. 2018 11:33PM

A Tesla Model S is seen after it hit the back of a mechanic truck from the Unified Fire Authority in this traffic collision in South Jordan, Utah, on Friday. (South Jordan Police Department/Handout via REUTERS)

People walk past the site of a crash on Saturday where a Tesla Model S sedan crashed into a concrete wall in the 1300 block of Seabreeze Blvd. in Ft. Lauderdale, Fla. The driver of the Tesla, Barrett Riley, and passenger Edgar Monserratt Martinez, both 18 and students at Pine Crest School, were trapped in the burning wreck and died in the crash. (Mike Stocker/South Florida Sun-Sentinel/TNS)

Tesla Inc’s chief executive officer told employees on Monday the company is undergoing a “thorough reorganization,” as it contends with production problems, senior staff departures and two crashes last week involving its electric, self-driving cars.

CEO Elon Musk said in an email it was “flattening the management structure to improve communication,” combining functions and trimming activities “not vital to the success of our mission” in the reorganization. The company confirmed the note that was disclosed earlier by the Wall Street Journal.

Tesla is at a critical juncture as it tries to fix production headaches that have slowed the rollout of its Model 3 sedan, a mid-market car seen as important to Tesla’s success, and as it expands on other fronts.

Tesla shares fell 2.9 percent to $292.37 on Monday.

Senior Tesla executives have departed or cut back work. Waymo, Alphabet Inc’s self-driving unit, said on Sunday that Matthew Schwall had joined the company from Tesla, where he was the electric carmaker’s main technical contact with U.S. safety investigators.

Last week, Tesla said Doug Field, senior vice president of engineering, was taking time off to recharge.

The company is developing multiple new vehicles, including a semi truck, and registered a new car firm in Shanghai in a likely step toward production in China.

Musk said on a May 2 earnings call that the company was “going to conduct sort of a reorganization restructuring of the company ... this month and make sure we’re well set up to achieve that goal.”

He added that “the number of sort of third-party contracting companies that we’re using has really gotten out of control, so we’re going to scrub the barnacles on that front. It’s pretty crazy. You’ve got barnacles on barnacles. So there’s going to be a lot of barnacle removal.”

Tesla will still rapidly hire critical positions “to support the Model 3 production ramp and future product development,” Musk said in the email.

Tesla faces a variety of other issues.

Investors gave a rare rebuke to Musk after he cut off analysts on the earnings call asking about profit potential, sending shares down 5 percent despite promises that production of the Model 3 was on track.

The company changed the terms of its borrowing agreement with banks to allow it to pledge its Fremont, California, auto plant as collateral.

A U.S. traffic safety regulator on May 2 contradicted Tesla’s claim that the agency had found that its Autopilot technology significantly reduced crashes.

Autopilot, a form of advanced cruise control, handles some driving tasks and warns those behind the wheel they are always responsible for the vehicle’s safe operation, Tesla has said.

In a Twitter post on Monday, Musk denied a Wall Street Journal report that Tesla had rejected a system that would have tracked driver eye movement when using Autopilot.

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