Tesla CEO Musk Tells Staff He Plans ‘Thorough Reorganization’

Tesla Inc’s chief executive officer told employees on Monday the company is undergoing a “thorough reorganization,” as it contends with production problems, senior staff departures and two crashes last week involving its electric, self-driving cars.

CEO Elon Musk said in an email it was “flattening the management structure to improve communication,” combining functions and trimming activities “not vital to the success of our mission” in the reorganization. The company confirmed the note that was disclosed earlier by the Wall Street Journal.

Tesla is at a critical juncture, as it tries to fix production headaches that have slowed the rollout of its Model 3 sedan, a mid-market car seen as key to the company’s success, and as it expands on other fronts.

Tesla shares fell 1.3 percent to $297 on Monday.

Senior Tesla executives have departed or cut back work. Waymo, Alphabet Inc’s self-driving unit, said on Sunday that Matthew Schwall had joined the company from Tesla, where he was the electric carmaker’s main technical contact with U.S. safety investigators.

Last week, Tesla said Doug Field, senior vice president of engineering, was taking time off to recharge.

The company is developing multiple new vehicles, including a semi-truck, and recently registered a new car firm in Shanghai, China, in a likely step toward production in China.

Musk said on a May 2 earnings call that the company was “going to conduct sort of a reorganization restructuring of the company … this month and make sure we’re well set up to achieve that goal.”

He added that “the number of sort of third-party contracting companies that we’re using has really gotten out of control, so we’re going to scrub the barnacles on that front. It’s pretty crazy. You’ve got barnacles on barnacles. So, there’s going to be a lot of barnacle removal.”

Tesla will still rapidly hire critical positions “to support the Model 3 production ramp and future product development,” Musk said in the email.

Tesla faces a variety of other issues.

Investors gave a rare rebuke to Musk, after he cut off analysts on the earnings call asking about profit potential, sending shares down 5 percent, despite promises that production of the Model 3 was on track.

The company recently changed the terms of its borrowing agreement with banks to allow it to pledge its Fremont, California, auto plant as collateral.

In the latest of two reported crashes last week that have drawn attention, a Tesla Model S sedan was traveling at 60 miles per hour when it smashed into a fire truck stopped at a red light in South Jordan, Utah, about 20 miles south of Salt Lake City on Friday night, according to police.

National Transportation Safety Board spokesman Keith Holloway said on Monday “at this point it doesn’t appear that NTSB is investigating” the Utah crash.

The Tesla driver suffered a broken ankle and was taken to a hospital, while the firefighter was not injured, the police said.

Witnesses said the Tesla sedan did not brake prior to impact, police said in a statement, adding it was unknown if the Autopilot feature in the Model S was engaged at the time.

“Tesla has not yet received any data from the car and thus does not know the facts of what occurred, including whether Autopilot was engaged,” the company said in a statement on Monday.

The NTSB said last week it was investigating a Tesla accident in Fort Lauderdale, Florida, on May 8 that killed two teenagers and injured another — the agency’s fourth active probe into crashes of the company’s electric vehicles.

Autopilot, a form of advanced cruise control, handles some driving tasks and warns those behind the wheel they are always responsible for the vehicle’s safe operation, Tesla has said.

A U.S. traffic safety regulator on May 2 contradicted Tesla’s claim that the agency had found that its Autopilot technology significantly reduced crashes.