Google Said to Have Negotiated Deal to Buy Tesla in Early 2013
2015-04-20 12:00:13.213 GMT
By Ashlee Vance
(Bloomberg Business) -- This story is excerpted and adapted
from Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic
Future, due out May 19 from Ecco, an imprint of HarperCollins.
On May 8, 2013, Tesla Motors shocked just about everyone by
posting its first-ever quarterly profit, reporting higher-than-
expected demand for its Model S electric sedan. That moment
marked the beginning of a turnaround for Elon Musk’s tumultuous
automaker. The next year would see the Model S win most of the
automotive industry’s major awards and Tesla’s share price rise
roughly fivefold, to more than $200. The 2013 profit
announcement was fortuitous. Just weeks before, Tesla had been
on the verge of bankruptcy.
Earlier in 2013 the company was struggling to turn
preorders of its vehicles into actual sales. As Musk put his
staff on crisis footing to save Tesla, he also began negotiating
a deal to sell the company to Google through his friend Larry
Page, the search giant’s co-founder and chief executive officer,
according to two people with direct knowledge of the deal. Tesla
spokesman Ricardo Reyes and Google spokeswoman Rachel Whetstone
declined to comment. “I don’t want to speculate on rumors,” Page
said when I asked him if Google had considered buying Tesla,
adding that a “car company is pretty far from what Google
knows.”
Although Tesla spent several years designing and building
its flagship Model S, the car was still missing some features
when it went on sale in June 2012. Its safety elements,
software, and interior room were better than those of most
luxury cars, but it didn’t offer the parking sensors and radar-
assisted cruise control of rivals like BMW and Mercedes-Benz.
Glitches with the 2012 Model S door handle irked early buyers,
as did some aesthetic choices such as the car’s sun visors,
which had unsightly seams.
A big part of the problem was a lack of resources, says
former Tesla engineer Ali Javidan. “It was either hire a team of
50 people right away to make one of these things happen, or
implement things as best and as fast as you could.” Musk chose
the latter, Javidan says. Tesla also strugged to get top-rate
suppliers to take it seriously, says chief designer Franz von
Holzhausen. With the sun visors, he says, “We ended up having to
go to a third-rate supplier and then work on fixing the
situation after the car had already started shipping.”
“I don’t care what job you were doing. Your new job is
delivering cars.”
Tesla’s first customers were proto-typical early adopters
who wanted a computer on wheels. By the end of 2012, many were
grumbling about the bugs still to be worked out, and sales
slowed to a trickle. “The word of mouth on the car sucked,” Musk
says. By Valentine’s Day 2013, Tesla was heading toward a death
spiral of missed sales targets and falling shares. The company’s
executives had also hidden the severity of the problem from the
intensely demanding Musk. When he found out, he pulled staff
from every department — engineering, design, finance, HR — into
a meeting and ordered them to call people who’d reserved Teslas
and close those sales. “If we don’t deliver these cars, we are
f---ed,” Musk told the employees, according to a person at the
meeting. “So I don’t care what job you were doing. Your new job
is delivering cars.”
Musk fired senior executives, promoted hungry junior
employees, and assigned former Daimler executive Jerome Guillen
to fix Tesla’s repair service and get its glitchy cars back on
the road. He also proposed what eventually became his public
guarantee of the resale price of the Model S: Unsatisfied buyers
would get their money back from Musk personally if they couldn’t
sell their car at a price comparable to that of another luxury
model.
In the first week of March 2013, Musk reached out to Page,
say the two people familiar with the talks. By that point, so
many customers were deferring orders that Musk had quietly shut
down Tesla’s factory. Considering his straits, Musk drove a hard
bargain. He proposed that Google buy Tesla outright — with a
healthy premium, the company would have cost about $6 billion at
the time — and pony up another $5 billion in capital for factory
expansions. He also wanted guarantees that Google wouldn’t break
up or shut down his company before it produced a third-
generation electric car aimed at the mainstream auto market. He
insisted that Page let him run a Google-owned Tesla for eight
years, or until it began pumping out such a car. Page accepted
the overall proposal and shook on the deal.
In the weeks that followed, Musk, Page, and Google’s
lawyers negotiated the specific terms of the deal. There were a
couple of sticking points around Musk’s financial demands that
complicated the talks and kept the two sides apart.
While the two companies were negotiating, Tesla’s frenzy of
sales calls began to pay off, and a lot more people started
buying the Model S. With its quarter drawing to a close and two
weeks worth of cash in its coffers, Tesla began selling
thousands of cars, enough to post an $11 million quarterly
profit on $562 million in revenue.
Within two weeks of that announcement, the company’s shares
had doubled, and Tesla had repaid its $465 million loan from the
U.S. Department of Energy early, with interest. Musk broke off
his negotiations with Google. He no longer needed a savior.Read
this next:
* Will Tesla Ever Make Money?
* Why Everybody Loves Tesla
* Want Elon Musk to Hire You at Tesla? Work for Apple
To contact the author on this story:
Ashlee Vance at avance3@bloomberg.net
To contact the editor on this story:
Jeff Muskus at jmuskus@bloomberg.net
2015-04-20 12:00:13.213 GMT
By Ashlee Vance
(Bloomberg Business) -- This story is excerpted and adapted
from Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic
Future, due out May 19 from Ecco, an imprint of HarperCollins.
On May 8, 2013, Tesla Motors shocked just about everyone by
posting its first-ever quarterly profit, reporting higher-than-
expected demand for its Model S electric sedan. That moment
marked the beginning of a turnaround for Elon Musk’s tumultuous
automaker. The next year would see the Model S win most of the
automotive industry’s major awards and Tesla’s share price rise
roughly fivefold, to more than $200. The 2013 profit
announcement was fortuitous. Just weeks before, Tesla had been
on the verge of bankruptcy.
Earlier in 2013 the company was struggling to turn
preorders of its vehicles into actual sales. As Musk put his
staff on crisis footing to save Tesla, he also began negotiating
a deal to sell the company to Google through his friend Larry
Page, the search giant’s co-founder and chief executive officer,
according to two people with direct knowledge of the deal. Tesla
spokesman Ricardo Reyes and Google spokeswoman Rachel Whetstone
declined to comment. “I don’t want to speculate on rumors,” Page
said when I asked him if Google had considered buying Tesla,
adding that a “car company is pretty far from what Google
knows.”
Although Tesla spent several years designing and building
its flagship Model S, the car was still missing some features
when it went on sale in June 2012. Its safety elements,
software, and interior room were better than those of most
luxury cars, but it didn’t offer the parking sensors and radar-
assisted cruise control of rivals like BMW and Mercedes-Benz.
Glitches with the 2012 Model S door handle irked early buyers,
as did some aesthetic choices such as the car’s sun visors,
which had unsightly seams.
A big part of the problem was a lack of resources, says
former Tesla engineer Ali Javidan. “It was either hire a team of
50 people right away to make one of these things happen, or
implement things as best and as fast as you could.” Musk chose
the latter, Javidan says. Tesla also strugged to get top-rate
suppliers to take it seriously, says chief designer Franz von
Holzhausen. With the sun visors, he says, “We ended up having to
go to a third-rate supplier and then work on fixing the
situation after the car had already started shipping.”
“I don’t care what job you were doing. Your new job is
delivering cars.”
Tesla’s first customers were proto-typical early adopters
who wanted a computer on wheels. By the end of 2012, many were
grumbling about the bugs still to be worked out, and sales
slowed to a trickle. “The word of mouth on the car sucked,” Musk
says. By Valentine’s Day 2013, Tesla was heading toward a death
spiral of missed sales targets and falling shares. The company’s
executives had also hidden the severity of the problem from the
intensely demanding Musk. When he found out, he pulled staff
from every department — engineering, design, finance, HR — into
a meeting and ordered them to call people who’d reserved Teslas
and close those sales. “If we don’t deliver these cars, we are
f---ed,” Musk told the employees, according to a person at the
meeting. “So I don’t care what job you were doing. Your new job
is delivering cars.”
Musk fired senior executives, promoted hungry junior
employees, and assigned former Daimler executive Jerome Guillen
to fix Tesla’s repair service and get its glitchy cars back on
the road. He also proposed what eventually became his public
guarantee of the resale price of the Model S: Unsatisfied buyers
would get their money back from Musk personally if they couldn’t
sell their car at a price comparable to that of another luxury
model.
In the first week of March 2013, Musk reached out to Page,
say the two people familiar with the talks. By that point, so
many customers were deferring orders that Musk had quietly shut
down Tesla’s factory. Considering his straits, Musk drove a hard
bargain. He proposed that Google buy Tesla outright — with a
healthy premium, the company would have cost about $6 billion at
the time — and pony up another $5 billion in capital for factory
expansions. He also wanted guarantees that Google wouldn’t break
up or shut down his company before it produced a third-
generation electric car aimed at the mainstream auto market. He
insisted that Page let him run a Google-owned Tesla for eight
years, or until it began pumping out such a car. Page accepted
the overall proposal and shook on the deal.
In the weeks that followed, Musk, Page, and Google’s
lawyers negotiated the specific terms of the deal. There were a
couple of sticking points around Musk’s financial demands that
complicated the talks and kept the two sides apart.
While the two companies were negotiating, Tesla’s frenzy of
sales calls began to pay off, and a lot more people started
buying the Model S. With its quarter drawing to a close and two
weeks worth of cash in its coffers, Tesla began selling
thousands of cars, enough to post an $11 million quarterly
profit on $562 million in revenue.
Within two weeks of that announcement, the company’s shares
had doubled, and Tesla had repaid its $465 million loan from the
U.S. Department of Energy early, with interest. Musk broke off
his negotiations with Google. He no longer needed a savior.Read
this next:
* Will Tesla Ever Make Money?
* Why Everybody Loves Tesla
* Want Elon Musk to Hire You at Tesla? Work for Apple
To contact the author on this story:
Ashlee Vance at avance3@bloomberg.net
To contact the editor on this story:
Jeff Muskus at jmuskus@bloomberg.net