Is Tesla following Old GM's playbook?
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March 01, 2019 02:30 PM

Is Tesla following Old GM's playbook?

Nick Bunkley
Nick Bunkley
News Editor overseeing coverage of GM, Ford, FCA and Tesla; coordinates in-depth projects for Automotive News
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    Musk
    BLOOMBERG

    Round after round of layoffs. Big price cuts as unwanted inventory piles up. A CEO who downplays growing evidence of disaster just around the corner, while flying around in a private jet.

    Elon Musk hasn't created the car company of the future. He's given us the second coming of Old GM.

    Musk says he entered the auto industry to help save the planet from harmful emissions and break the world's oil dependence. He clearly also thought he would show the fools running Detroit's bumbling automakers a thing or two about how to make and sell cool cars.

    He did persuade Wall Street to give Tesla a higher valuation than Ford Motor Co. But lately, Tesla has been more reckless and impulsive with investors' and customers' money than Ford or General Motors ever were.

    In December, Tesla touted the opening of 11 more stores.

    On Thursday, it abruptly said it was closing virtually all of its stores to cut costs and transitioning to online-only sales instead. That doesn't seem like a carefully crafted plan. And the gutting of its sales force comes less than two months after Tesla said it was cutting 7 percent of its workers.

    Meanwhile, the customers that Musk often thanks for putting their faith -- and hard-earned dollars -- into Tesla are penalized each time the company slashes prices. As Old GM well knew but did anyway to keep factories running, discounts distress resale values and make customers feel like suckers for paying thousands of dollars more weeks or months earlier.

    "I took delivery 3 months ago, and my build is now 22K cheaper," a Model S buyer posted Thursday on one Tesla message board. "That just doesn't seem right."

    Tesla has cut the prices of its vehicles three times this year already. It's not even spring yet. Can "Employee Pricing for Everyone" be far off?

    The latest cut finally fulfills Musk's promise of offering the Model 3 at $35,000 before incentives. Tesla had the nerve to claim it was hitting that price "earlier than we expected," even though the 400,000-plus people who got on the reservation list were led to believe they'd have one in their garage before Tesla's federal tax credits were cut in half Jan. 1.

    Tesla's also using one of Old GM's tricks -- decontenting vehicles -- to hit the price it promised. By building only more expensive versions for more than a year, Tesla made sure that customers waiting for the base model now see exactly what they'd be missing out on, rather than being excited about the car being available within their budget. And they'd better like black, because any other exterior color is at least $1,500 more.

    As for Tesla's profitability, it's retreating from earlier predictions -- with Musk acknowledging Thursday the company will remain in the red in the first quarter. 

    Tesla's story may yet have a happier ending than Old GM's. It's a much smaller, nimbler company that doesn't have nearly the legacy baggage that ultimately dragged GM into bankruptcy.

    But Musk has his company following much of the same playbook, and that's asking for similar results.

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