By Ben Klayman
DETROIT Oct 4 Tesla Motors Inc Chief
Executive Elon Musk dismissed fears the electric carmaker was in
financial trouble and said it was making an advance payment on
the federal loan used to make its Model S sedan.
Tesla, whose shares were off 2 percent Thursday afternoon,
last week cut its full-year revenue forecast due to a
slower-than-expected rollout of the Model S and said it was
raising another $150 million through a share offering.
The California company also disclosed last week that it had
fully drawn down its $465 million U.S. Department of Energy loan
facility, and the loan pact had been amended to delay repayment
of a portion of the funds. The company agreed to make additional
early payments starting next year and said it would work with
DOE officials to develop an early repayment plan.
Republicans have criticized the Obama administration for the
DOE's support of new-technology companies, citing the struggles
of electric carmaker Fisker and electric battery maker A123
Systems Inc, as well as the bankruptcy last fall of
solar panel maker Solyndra.
During Wednesday night's presidential debate, Republican
Mitt Romney grouped Tesla with Fisker and Solyndra, calling them
Musk, in a blog posted before the debate on Wednesday, said
misconceptions had arisen from last week's disclosures by the
company and he wanted to correct the media's "wrong impression"
that Tesla was in financial trouble.
"We described a relatively pessimistic scenario for Tesla,
which was incorrectly interpreted by some to be what we thought
was the most likely scenario," he said. "We raised the funds
(from the stock offering) simply for risk reduction."
He reiterated that Tesla was on the verge of becoming
cash-flow positive by the end of November and said it would not
have to spend any of the new money it had raised until it began
a major new vehicle program.
Barclays said the focus for Tesla is on executing a
successful rollout of the Model S.
"Tesla remains an execution story and thus, the emergence of
data points that verify management is executing to plan - rather
than specifics around its goals - are likely the key drivers for
share appreciation," analysts Amir Rozwadowski and Brian Johnson
wrote in a research note.
Tesla has an ambitious portfolio of future products. The
next vehicle due is the Model X, a mid-size crossover based on
the Model S. Tesla plans to begin building the Model X in late
A $30,000 compact sport sedan, aimed at competing with the
BMW 3 Series, is due in 2015, a Tesla executive told
Britain's Autocar magazine in July. The company also is
considering production of a roadster about the same size as the
sedan, according to Car and Driver magazine, citing a Tesla
spokeswoman. Both cars would be based on the Model S.
Musk acknowledged the Model S launch was a few weeks behind
schedule but said the delay was not as bad as it appeared. He
said flooding at a supplier factory caused a shortfall in
shipments and delayed production.
Tesla last week said it expected to deliver up to 3,225 of
the cars this year, compared with an initial target of 5,000.
However, it also said it would exceed its 2013 target of 20,000
Musk said of the DOE loan, which accounts for a third of the
company's capital raised to date, that Tesla has always made its
payments on time and has never asked to delay repayment. He said
the DOE's desire for advance payments was because the department
expects the company's success to lead to the accumulation of
large amounts of cash, not because of concern about Tesla's
"The DOE is highly bullish about our future and doesn't want
us to delay early repayment of the loan if we have the cash on
hand to do so," Musk said.
He said Tesla will begin an advance payment on Wednesday to
prefund the principal payment due next March.
"We have a duty at Tesla, having accepted this loan as a
portion of our capital, to repay it at the earliest
opportunity," Musk said. "We will do exactly that."