Tesla shareholders reject proposal to separate Musk's roles
Tesla Inc. shareholders at an annual meeting on Tuesday re-elected three directors and voted against a proposal to split the chairman and CEO posts held by co-founder Elon Musk.
Musk said on Tuesday that a goal of building 5,000 Model 3s per week by the end of June was "quite likely" as the company's production lines were now capable of building 3,500 vehicles per week.
"This is the most excruciating hellish several months I've ever had... but I think we're getting there," Musk said during Tesla's annual meeting of stockholders in Mountain View, Calif.
The bid to separate the chairman and CEO roles represented the strongest challenge yet to Musk's grip on the Silicon Valley electric vehicle maker, which also faces production setbacks and expectations by many analysts that it will need to raise new cash.
One investor proposed splitting the chairman and CEO posts, arguing the sprawling company has become difficult to oversee. Musk owns a 20 percent stake in the company.
Union-affiliated investment adviser CtW Investment Group had rallied shareholders to reject three Tesla directors it says lack qualifications or independence, including investor Antonio Gracias, Tesla's lead independent director; James Murdoch, the CEO of Twenty-First Century Fox Inc; and sustainable food executive Kimbal Musk, Elon Musk's brother.
Proxy firms Glass Lewis and Institutional Shareholder Services and activist investor CtW Investment Group had supported separating the chairman and CEO roles and mostly opposed the three directors, the only ones up for election this year.
Tesla had recommended shareholders leave Musk with both top jobs and argued the directors are qualified.
Musk choked up after taking the microphone to talk about the company onstage in front of investors.
"At Tesla we build our cars with love," Musk said, visibly moved. "At a lot of other companies, they're built by marketing or the finance department and there's no soul. We're not perfect but we pour our heart and soul into it and we really care."
Tesla has been struggling to ramp up production of the new Model 3 sedan, which is crucial to the company's long-term profitability. Manufacturing bottlenecks have delayed the delivery of vehicles to customers and deferred much-needed revenue as the company continues to spend heavily on Model 3 production fixes, as well as projects in the pipeline.
Musk, who has insisted the company will not need to raise money this year, has also come under fire for his behavior during an earnings conference call last month, in which he cut off analysts posing financial queries, rejecting them as "boring, bonehead questions." Shares fell as much as 7 percent after Musk's snub, evaporating $2 billion from Tesla's market value.
As of Tuesday, shares of Tesla were down nearly 8 percent from the beginning of the year and off 25 percent from a year high of $389.61 in September.
But on Wednesday, the shares surged 10 percent to close at $319.50.
The company has been engaging in so-called "burst builds," temporary periods of full-scale production. Tesla then extrapolates the number of cars built during these short-term burst builds over a longer time period.
Analyst Brian Johnson of Barclays warned investors in March to be wary, however, of brief "burst rates" of Model 3 production that were not sustainable.
Musk on Tuesday said he expected positive net income and cash flow in the third and fourth quarters.
Meanwhile, Tesla is also now turning its attention toward expanding its manufacturing capacity by adding another plant, which will produce cars, battery packs and powertrains in Shanghai. Tesla was currently in talks with the Chinese government, another executive said.
The company may announce more details about that factory as soon as next month, Musk said, then reveal plans for another to be built somewhere in Europe toward the end of 2018.
On the product front, the all-wheel drive version of the Model 3 will come out next month, Musk said. The shorter-range battery version of the car that starts at $35,000 will start to arrive late this year, though the company may not reach volume production of that iteration until the first quarter of 2019.
Tesla then plans to unveil the Model Y crossover in March. That will go into production in the first half of 2020, along with the Semi truck and Roadster models, Musk said.
Bloomberg contributed to this report.
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