Tesla to Suspend U.S. Car Production
March 19 2020 - 06:50PM
Dow Jones News
By Tim Higgins
Facing pressure to shutter Tesla Inc.'s California factory from
local authorities worried about the spread of coronavirus, Chief
Executive Elon Musk changed direction, announcing plans to suspend
production at its lone U.S. auto-making plant.
The move threatens to disrupt the Silicon Valley auto maker just
as it was stepping up production of its latest vehicle, the Model Y
SUV, which is part of Mr. Musk's plan to boost deliveries globally
by more than 36% this year.
The health crisis from the spread of Covid-19 -- the illness
caused by the coronavirus -- in the U.S., especially in California,
led counties in the San Francisco area on Monday to order
nonessential businesses to close to allow people to stay home to
combat the spread of the potentially deadly disease.
Tesla's statement Thursday laid out a plan for work to be
temporarily suspended at the Fremont factory. Production will cease
at the end of March 23 to give the company time to "allow an
orderly shutdown," the company said, while it would conduct "basic
operations" as required by authorities.
The auto maker will also stop production at its solar factory in
New York while keeping its Nevada battery factory working along
with its nationwide service and charging network.
That Tesla kept building cars Tuesday and Wednesday and showed
no signs of stopping put it at odds with the rest of Silicon
Valley. Even competitors General Motors Co., Ford Motor Co. and
Fiat Chrysler Automobiles NV have all disclosed their own closure
plans.
Even if Mr. Musk wanted to continue to make cars, analysts
doubted he would be able to much longer as parts suppliers are
likely to be affected by closures across the U.S. and Europe and
previous ones in China. It is also likely that sales will fall
dramatically in coming months. In China, which was first hit by
Covid-19, new vehicle deliveries plunged almost 80% in February
from a year ago.
Tesla also tried to reassure investors it could financially
absorb the impact from the production pause, saying it had $6.3
billion in cash on hand at the end of December before raising an
additional $2.3 billion in new shares a few weeks ago. Tesla also
has access to about $3 billion in working capital plus financing
available for its Shanghai factory, the company said.
"We have followed and are continuing to follow all legal
directions and safety guidelines with respect to the operations of
our facilities, and have honored the Federal Government's direction
to continue operating," the company said in a statement. "Despite
taking all known health precautions, continued operations in
certain locations has caused challenges for our employees, their
families and our suppliers."
The decision ends several days of confusion over the status of
Tesla's Fremont factory.
Initially, Alameda County, where the factory is located, said
the plant wouldn't need to close. Then, on Tuesday, the county
sheriff's office said Tesla wasn't an essential business during the
health crisis and would need to limit work to "minimum basic
operations." The office said it needed to stop production.
Despite the sheriff's comments Tuesday, Tesla didn't halt work
at Fremont. Employees were instructed to continue working, though
those who felt uncomfortable were told they could take personal
time off to stay away.
Fremont Police Chief Kimberly Petersen earlier Thursday said she
would meet with Tesla officials to discuss cooperation with a local
government order directing nonessential businesses to shut down to
combat the coronavirus pandemic. The police disclosed the meeting
through a message on Twitter. A spokeswoman didn't respond to a
request for comment.
Write to Tim Higgins at Tim.Higgins@WSJ.com
(END) Dow Jones Newswires
March 19, 2020 18:35 ET (22:35 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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