We reported a few weeks ago that Tesla co-founder Martin Eberhard filed a lawsuit against Tesla and Tesla CEO Elon Musk, citing allegations of slander, libel and breach of contract. Tesla issued a short statement when the lawsuit was filed, calling the lawsuit a “fictionalized account of Tesla’s early years.” Now Musk has taken to Tesla’s blog to give his own version of the messy situation. Unrelated to the lawsuit, Musk says that Tesla will be profitable by next month, thanks to lower material costs, and increased Roadster Sport sales.
Musk responds to several of Eberhard’s allegations that he lied about his background and fictionalized pieces of his resume to embellish the truth:
The facts are that when I requested through AC Propulsion to meet Eberhard, he had no technology of his own, he did not have a prototype car and he owned no intellectual property relating to electric cars. All he had was a business plan to commercialize the AC Propulsion Tzero electric sports car concept. Three years later, when Eberhard was asked to leave Tesla, most of the work that he had been paid to do had to be redone.
Particularly, Musk addresses Eberhard’s complaints that the PayPal founder misrepresented his education. Musk maintains that he did his undergraduate studies in physics and business at UPenn/Wharton (we confirmed this with Wharton—Musk was an undergraduate alum and holds degrees from both Wharton and the College of Arts & Sciences) and despite dropping out of grad school at Stanford, maintained affiliations with the university by working with the Stanford Engineering Advisory Council.
Musk also addresses Eberhard’s claims that he had no hand in the making of the Roadster and that Musk’s management was detrimental to the business. Musk writes that while Eberhard was leading the operational teams, Musk himself focused on the body design, technical specifications and building the Tesla brand. Musk also says he spent significant time “on the details of the product and particularly the body styling — you will see elements of two of my favorite cars (Porsche and McLaren F1) in the Roadster body — but left most day to day management of the company up to Eberhard.”
The tale from Musk is quite different than Eberhard’s allegations that Musk and Tesla pushed him out of the company for no reason. According to Musk’s post, Eberhard grossly miscalculated costs of production of the Roadsters and purposely withheld this information from Musk and investors:
The real reason that Roadster development cost so much more than can be accounted for by typical entrepreneurial hubris is that we essentially had to spend the development money twice. After Eberhard was asked to step down from the CEO role two years ago, almost every major system on the car, including the body, HVAC, motor, power electronics, transmission and battery pack, had to be redesigned, retooled or switched to a new supplier.
The post is a fascinating read in its own right, diving deep into some of the early missteps at Tesla and how they were overcome. For instance, the company’s decision to move production of the battery packs from Asia to the United States was counter-intuitive, but crucial to its survival. Writes Musk:
Avoiding the cost of shipping a half ton pack from Asia also meant significant savings on shipping costs. This is a much bigger deal for a heavy and bulky product than a small consumer electronics device, where outsourcing to Asia makes a lot more sense. Very importantly, our supply chain went from a tectonically slow six months and having to pay for tens of millions of dollars of inventory in transit to a matter of a few weeks.
Musk also includes some emails to back up his counter-claims against Eberhard but says that while the post is meant to clear up several misconceptions, there is more to come in a formal response to the lawsuit which will be filed soon. I’ve included a couple of the juicier snippets from the emails below but you can see more of the emails in Musk’s blog post.
As we wrote in our earlier report, a lot of Eberhard’s claims seem like sour grapes. It’s unclear how much he’s seeking in damages.
FYI-Michael Marks was the interim CEO of Tesla who was brought in to the company in 2007. Darryl Siry, was the head of Sales, Marketing & Service at Tesla during this time period
From: Michael Marks
Sent: Thursday, November 15, 2007 10:38 PM
To: Elon Musk
Subject: boardI’ve thought about it, and completely agree with the idea that Martin
shouldn’t stay on the board, just fyiEmail presaging the host of issues that had to be fixed:
—–Original Message—–
From: Elon Musk
Sent: Thursday, August 09, 2007 08:56 AM Pacific Standard Time
To: Jim Marver; Ira Ehrenpreis; Antonio J. Gracias; kimbal
Subject: Fw: meetingThis is not good. Sounds like there are more issues that the board was not informed about. I will send out a note as soon as I talk with Marks and will ask him to email an assessment to the board as soon as he can.
Martin seems to be focused on his public image and position within Tesla, rather than solving these critical problems. If you should speak with Martin, please urge him to spend all his energy on making sure that the Roadster works and arrives on time. He doesn’t seem to understand that the best way to maximize his reputation and position within the company is to help get this right.
From: Darryl Siry
Sent: Thursday, May 08, 2008 6:28 PM
To: Elon Musk; Ze’ev Drori
Subject: Martin EberhardElon & Ze’evSome recent developments in the past few days have given me cause for serious concern regarding the amplification of Martin’s public statements about the company. I have come to the conclusion that Martin and his wife are hell bent on damaging the company by doing everything that they can to cast the company in a negative light and accuse the company of deceptive and unethical practices.
My counsel to you in the past has always leaned to the side of appeasement, thinking that by doing what we can to defuse the situation would minimize the negative publicity potential. Recent events have led me to a conclusion that Martin and his wife will continue to take every opportunity to damage the company through their statements in the press and on public internet forums. The fact that we are on the verge of delivering his car and he is increasing his attacks causes me to wonder whether we will ever be free from these unceasing attacks on the company.
In conclusion – I believe the board should take under serious consideration the severing of all ties with Martin Eberhard including the refunding of his reservation payment and cancelling of his order. If this course of action were to be pursued by the board, I would recommend that the company issue a public statement announcing our intention and outlining the rationale that led us to this conclusion. While this action may be considered severe and would no doubt create a stir, I feel this route may be better than subjecting the company to an unceasing negative publicity campaign that is fueled by his continued ties to the company as an early customer. Carolyn Eberhard’s comments in an email to me implying that they would seek to derail our attempts at going public is especially concerning.
Tesla is the Valley’s biggest, most boring soap opera about a company that has yet to really do anything. I’m so sick and tired of hearing about them taking up blog space. Who really cares? Whatever promise they made to change the auto industry hasn’t happened and now they are just a VC time suck. I think the 80s rock band Tesla has more value at this point.
I would call making the only production electric car on the market “doing something”.
Wait for 3 years, the first production cars will show the true color and environmental facts.
Li-ion batteries will no longer sustain the drive and charge. all those 6000 odd batteries will require to be replaced and that’s a huge environmental responsibility.
As for the soap, Musk is not clean either, Leena, you gotta check his background and do another article.
when they say ‘profitable’ does it mean they have recovered all of $186M in funding and now earning (returning profits) to the investors?… sorry i am bad at maths.
My understanding of profit is that one has to earn back what was invested, whatever more that is earned is profit.
some batteries have large environmental costs, such as the NiCad chemistry. The lithium ion and lithium polymer packs currently used are not damaging to the environment, or at least not more so than common house-hold trash.
regardless of battery chemistry, an alternative to ICE must be found,
Bullshit. Not to mention, all those batteries are being charged with nuclear generated electricty, or worse, cogen oil and coal. Hardly safe for the environment.
Musk is a con man, go get him Martin. We all hope you knock this douche down a few rungs.
I believe that the Tesla will use a Li-Poly chemistry for their batteries. It has a lower energy-density than standard Li-Ion battery packs but it contains no heavy metals, has a longer life and is immune to the “runaway reaction” that has led to some Li-Ion packs to catch fire. (http://www.thet...et/?page_id=951)
As for profitable, they mean that the company will begin to make money from the sale of vehicles. It may take time for them to make back all the money that has been invested, but that’s the nature of investment. (Investors are betting on the long-term viability of the company, not that they will get a lump-sum payment.)
Li-Poly batteries are definitely more dangerous then Li-ion. We use them in model planes and helicopters, because they are very light and you can draw very large currents from them. However they are extremely dangerous when being recharged, which is why we charge them inside ammunition, or similar boxes, usually on a layer of sand. I have seen quite a few of them go boom, some even in the air under normal use, and it is not pretty
Think simply; profitable = spending less than bringing in for a given period.
In this case, they’re probably talking quarters rather than the entire life of the company.
I view Tesla as a catalyzing company. Even if their production line doesn’t result in tremendous positive environmental impact, it lights a fire under larger automakers.
(And who can fault a guy who’s making electric cars AND replacements for the space shuttles?! ^^)
How does building cars and giving them to people (who are actually driving them) count as “not doing anything.”
“I think the 80s rock band Tesla has more value at this point.”
LOL – awesome comment.
That is brilliant
chase
Earn extra cash taking surveys and referring friends. No get rich quick. Something to supplement a steady income.
ouch. Whether this is going to be dirty or pan out, it’ll have a horrible effect on tesla’s PR.
couldn’t agree more with you..this will definitely affect the company.
it’s already dirty
And they’re already dead, they just don’t know it yet. Musk, stop haunting this blog.
The saying goes… Everyone gets dirty in a mud fight!
Is the infighting and lawsuits going to deadpool the company? I already think that they are making a huge mistake in starting their own manufacturing plant from scratch. They should lease the line from NUMI (while their runs are down) and if/when they have a successful (i.e. profitable and/or outgrow the line’s availability) manufacturing group, then should go and get the new and sexy manufacturing line.
you guys have got to stop calling elon musk the founder of PayPal. He was the founder of x.com, which was on its way toward failing when it was merged with another payments company to make paypal. There are no founders of paypal.
They should probably stop calling him the founder of Tesla while they’re at it. Elon was just an investor.
Its a shame to see a founder booted out by an investor, regardless of the situation. Were it me, I’d want reconciliation as well.
“regardless of the situation”
So when a founder is running a company into the ground, an investor with his own money and time riding on the success of the company cannot take steps to rescue the company? I agree with your principle, but to make it “no exceptions” is absurd.
as an investor the only recourse he should have is divestment.
“In conclusion – I believe the board should take under serious consideration the severing of all ties with Martin Eberhard including the refunding of his reservation payment and cancelling of his order”
Ouch..this might look very unnecessary.
Whatever. I just can’t stand the guy’s slimeball smile.
you know musk got his foot into the paypal organization by deceit. X.com anyone… good times..
he was kicked out of the paypal ceo position by paypal employees demanding peter t. to be back from bean counting. They just couldnt believe his demeanor and arrogance. By the time x customers and technology were merged with paypal customers, paypal employees realized x.com customer list was as good as a mailing list you would get from yellow pages.
I cant say I am sorry for Eberhard but wake up and smell the coffee before accepting an agreement with someone check references/reputation…
musk isnt passionate about cars, or car culture… he sees dollar signs at the end of the tunnel, which is fine… him owning a McLaren, and flipping it over on a freeway by Palo Alto doesnt make him a passionate car enthusiast. It just proves he is flash and thrash, and doesnt even know how to drive the car. Thank god it wasnt 911 RS4…
Ironically it will be a hard battle for ego driven company. If he was fully passionate about the product, he wouldnt have to waste that much money. Fisker with all their problems, and silliness will eat this company in one bite right now.
With what percentage of knowledge did he enter these waters?
And, at what percentage of knowledge do you suppose he is at, right now?
before you start swearing at me, tell me – what is a greenhouse, and what is lotus elise package ;?)
’nuff said
’nuff said??? Did you really just out yourself? That’s funny.
you know musk got his foot into the paypal organization by deceit. X.com anyone… good times..
he was kicked out of the paypal ceo position by paypal employees demanding peter t. to be back from bean counting. They just couldnt believe his demeanor and arrogance. By the time x customers and technology were merged with paypal customers, paypal employees realized x.com customer list was as good as a mailing list you would get from yellow pages.
I cant say I am sorry for Eberhard but wake up and smell the coffee before accepting an aggrement with someone check references/reputation…
musk isnt passionate about cars, or car culture… he sees dollar signs at the end of the tunnel, which is fine… him owning McLaren doesnt make him a car enhusiast, him flipping the car by Palo Alto freeway exit proves that he is just a bit irresponsible a 55hole. Thank god it wasnt 911 RS4, then he wouldnt have bragging rights.
Ironically it will be a hard battle for ego driven company. If he was fully passionate about the product, he wouldnt have to waste that much money. Fisker with all their problems, and sillyness will eat this company in one bite right now.
With what percentage of knowledge did he enter these waters?
And, at what percentage of knowledge do you suppose he is at, right now?
before you start swearing at me, tell me – what is a greenhouse, and what is lotus elise package ;?)
’nuff said
nothing like a good cat fight
Well, he did put in all the seed capital, so he deserves to run the company if that is his desire. The web graveyards are mostly full of people that have failed. This guy is a success story. All I’m saying is that the press should accurately describe him. He is not the founder of PayPal — period. He is the founder of Spacex and probably other companies. Not a big deal.
Whatever anyone thinks Elon Musk was instrumental to PayPal and just as much Tesla. He’s a cocky, smirking guy but he’s also pretty much a bonafide genius.
Give him some credit.
makes a lot of sense when you say it that way.
After reading the lawsuit Eberhard filed he seems like a bitter ego maniac that is more intent on taking credit for inventing the electric car then to acknowledging reality. Yes he and 2 others presented a plan to Musk through AC propulsion (the company that really built the first li-ion powered car) for commercializing their tzero and had a cool name for it. They weren’t even the only group presenting such a plan to AC. Without Musk they wouldn’t of had anything more then the name of an 80’s hair band / dead scientist. Luckily Musk invested millions of dollars and expertise in the company and Tesla was founded. It sounds like from there out Eberhard got in over his head, didn’t know what to do, and tried to hide his poor management from the board of directors. Eberhard needs to accept his mistakes and let the bitterness go. Musk might be really nice or a total slime ball for all I know but I wound’t bet against him. His body of work (solar city, space x, etc.) speak for themself, and now with Eberhard revealing his true nature to the public this will likely allow Tesla customers to attribute the companies early mistakes to the Eberhard era. I predict ten years from now Eberhard will still be bitter and Tesla will be a force in the auto world.
Martin Founded Tesla Motors. but he messed up not keeping controlling stock. it was inevitable that he would eventially lose control if the company showed signs of success.
Elon Musk is very lucky the company is still afloat. his tesla roadster is “Grossly Over priced”. and I seriously doubt that Tesla will be showing any profit in a month. if they do, it will be because of Ledger manipulation and Not from sales.
Eberhard had the right idea from the beginning, Build Low cost Electric vehicles. Elon is the one who wanted Overpriced Sport Cars. Bad Move if you ask me. If Musk would have not been involved, Tesla may have been the Driving Force in the EV industry. as it is now, Tesla will always be a Small time EV Manufacturer.
Once GM, Chrysler and Ford get their Series Hybrids out in mass, Tesla Motors will be a dying company.
Sounds like it’s all a mess. I wouldn’t have posted anything on a blog until everything it settled in court.
This is an interesting story. Eberhard is bitter and Musk is seeing dollars signs. But to label Musk a genius is just crazy.
Genius – someone who has exceptional intellectual ability and originality
He is not a genius.
Musk is smart (keeping old emails) and he has learned to cover his butt. Eberhard is in trouble. The email does a lot of damage to his suit and his claims. The smarter guy won and will probably settle at some point just to make Eberhard go away forever.
How do you know that one of these guys is smarter than the other? I’d like to see balanced story if TechCrunch is going to draw this out.
Building a new auto company and its first car is just about as complex an enterprise as you can undertake. Many mistakes are going to be made, even with the smartest people involved. That’s not to say that Elberhard didn’t cross the line by hiding facts from the board that warranted his dismissal. But these circumstances don’t mean that Musk was some kind of savior. Taking credit for ‘car styling’ and ‘branding’ doesn’t sound very convincing to me.
I say Musk is smarter because he has the material to back up his claims. As it stands right now, Eberhard’s claims are appearing to be hearsay. Also, if the former CEO’s are called to testify they will not be doing Eberhard any favors.
I agree with you on Musk. He is not a savior. However, he had enough experience to cover his own tail if things go wrong. He has learned from his mistakes and thus I feel he is the smarter one between the two. When the company was burning through cash, he started to ask more questions. Again, learning from previous mistakes.
Eberhard better have some hard facts or he is done.
I take my hat off: Elon Musk has the biggest “cojones” in the business. He risked all his money to turn around Tesla. Not surprisingly his biggest challenges were internal. He has succeeded in building the only production electric car on the market…in a down market. Moreover, looks like Tesla will be profitable. Who care about Jack Welch Elon is the man.
Tesla will never be profitable; just watch and see the eletric car fail.
Yes, I question his “profitable” claim. We will have to wait and see.
I find it interesting that Darryl Siry calls it Martin’s car in the email dated Thursday, May 08, 2008 6:28 PM.
“The fact that we are on the verge of delivering HIS CAR and he is increasing his attacks causes me to wonder whether we will ever be free from these unceasing attacks on the company.”
It cost them 186M to take a lotus elise, swap out the drive-train (with off the shelf parts) and a couple of body panels and resell it?
Unrelated to the lawsuit, Musk says that Tesla will be profitable by next month, thanks to lower material costs, and increased Roadster Sport sales.
Always wanting a bigger piece of the pie! Why are we not surprised here?
http://www.total-privacy.tk
This whole situation with Tesla seems a bit fishy.
I’m excited about electric cars news but tired of hearing about Tesla Motors- until they start producing cheaper models. For electric cars to be serious contenders, they need to be mid-priced economy vehicles that most households can by with tax incentives etc. According to new reports, up to 1/3 of cars buyers want to go electric- which would reduce oil dependency, green house emissions, foreign oil dependency, health care costs, and create jobs. For more information about electric cars, I suggest checking out the website http://www.twocentspermile.com or http://www.bit....y/2centspermile