Tesla’s battle with The U.S. Seal: Agree to Close The Plant and Regret, Delivering Pressure

Tesla has been slow to close its only u.S. auto assembly plant after the San Francisco Bay Area issued an “in-place asylum order” over the outbreak. During that time, Tesla struggled with government directives and repeatedly backed down, eventually having to close the plant, Bloomberg reported. Behind Tesla’s efforts to maintain U.S. factory operations are the pressure on the company to deliver on its vehicles.

Tesla's battle with The U.S. Seal: Agree to Close The Plant and Regret, Delivering Pressure

Tesla Felicity Plant

Documents obtained by Bloomberg through the California Public Records show that Tesla’s only U.S. auto assembly plant, in defiance of the San Francisco Bay Area’s “in-place asylum order,” continued to operate for several days, posing a public health risk.

In a series of conversations over the past few days, officials in Fremont, California, told Tesla that its plant was not considered necessary, so Tesla needed to comply with the Alameda County In-Place Asylum Order issued on March 16. Tesla then announced on March 19 that it would suspend production after four days.

The documents reveal in more detail the days-long dispute between Tesla and the local government. Tesla is seeking to maintain the plant’s operations, citing the federal government’s definition of critical infrastructure. Before Tesla gave in, the Felimon police chief, the assistant city manager, Alameda County health officials and the assistant legal counsel were all involved in the dispute. Tesla has not responded to a request for comment.

The San Francisco Bay Area was the first U.S. region to issue an “in-place asylum order”, a massive outbreak prevention and control effort that affected more than 7 million people. Since then, the new corona virus has wreaked havoc in the U.S. community, putting the global economy under enormous pressure. As of Tuesday, there were 294 confirmed cases of the new coronavirus in Alameda County, and seven people died, according to data released by the Alameda County Health Department.

Government meets to deal with Tesla

Just hours before Tesla announced its planned shutdown, Fairmont Police Chief Kimberly Peterson and other city officials held an online meeting on March 19 to follow up on a decision the day before that Tesla must stop all activities except minimum basic operations.

Peterson wrote to Tesla on March 21 that the city was trying to clarify whether Tesla was a necessary business and consulted Withamed County Assistant Legal Counsel Scott Dickey. Dickey relayed the decision of Erica Pan, a health official in Alameda County.

Tesla's battle with The U.S. Seal: Agree to Close The Plant and Regret, Delivering Pressure

Alameda County doesn’t see Tesla as a necessary business

Dickey told city officials that Dr. Erica Pan did not see Tesla as a necessary business, but as a manufacturing plant that would become a public health hazard. Peterson said in the letter.

The Tesla Felicity plant employs about 10,000 people, but many workers commute from other places to work in Felicity, including California’s Central Valley. Tesla informed employees last week that the two employees had been diagnosed with the new coronavirus, but did not specify which office they worked in.

Nevada television on Sunday cited an email from Panasonic, Tesla’s battery source, to employees that said a Tesla employee working at a superbattery plant near Reno was infected with the new corona virus. Tesla has more than 48,000 employees worldwide by the end of 2019.

Agree to phase off the plant

Tesla representatives met with Mr. Felicity on March 19, including Rohan Patel, Tesla’s senior director of policy and business development, who worked in the Obama administration. At the time, Tesla said it intended to comply with the “in-place asylum order”, despite the need to “phase out the plant.”

The two sides agreed that all vehicle scars at Tesla’s Felicity plant would stop on March 23and, and that employees at the plant would complete the assembly line to protect the value of cars and batteries. Other employees maintain basic operations such as security, maintenance and cleaning, all of which require compliance with social alienation requirements.

“You have clearly agreed with this understanding,” Peterson later wrote, “and if you want to switch to ventilators or other devices used to fight the new coronavirus, these activities will be allowed.” “

Tesla's battle with The U.S. Seal: Agree to Close The Plant and Regret, Delivering Pressure

Musk says he wants to make a ventilator.

The meeting with Mr. Felicity came a day after Tesla CEO Elon Musk tweeted on March 18 that the company would produce ventilators if there was a shortage of ventilators. Since then, Tesla has been in talks with Medtrony, a well-known ventilator maker, but there is no indication that Tesla will play a role in the process.

Back

At another web conference on March 22, Tesla reversed its decision to shut down the plant. Alan Prescott, Tesla’s acting general counsel, argued that the Alameda County health directive had been replaced by a new statewide directive issued by California Governor Gavin Newsom. Under the Newsom directive, “critical infrastructure areas” would be exempted. Tesla believes the area includes the company’s factories, so the company can continue to operate fully.

Peterson told Tesla at the meeting that Fairmont officials would not accept the argument and that Tesla would have to phase out operations because it was “the right thing to do.”

Musk tweeted two days ago that Tesla had no choice but to continue operating because the company’s parts suppliers could not continue to operate their plants.

Peterson told Tesla that she would schedule an inspection of the Tesla plant on March 24 to make sure tesla complied with the order.

“Finally, I would like to reiterate that the city of Fairmont attaches great importance to Tesla as a partner and thanks you for your contribution to our economy and our community,” Peterson said in an email to Tesla. “

Delivery pressure

At the end of each quarter, Tesla makes a lot of decisions to increase delivery. At this point, Musk often issues a mobilisation order encouraging employees to deliver as many cars as possible to customers.

But in March, that strategy may not work. The “in-place asylum order” and social alienation policies issued around the world limit Tesla’s ability to deliver cars. Despite Musk’s attempts to save the season by introducing a “contactless” delivery option at selected locations, the new coronavirus pandemic is expected to severely dampen demand for all automakers.

Tesla will deliver about 774,000 vehicles worldwide in the first quarter, according to analysts’ average expectations, including the Model Y crossover, which has just begun to be delivered. Although the figure was better than disappointing deliveries a year earlier, it was down more than 30 per cent from record deliveries in the fourth quarter of last year.

“Tesla typically delivers a disproportionate number of cars in the last two weeks of each quarter,” Morgan Stanley analyst Adam Jonas said in a note Monday. “

Tesla's battle with The U.S. Seal: Agree to Close The Plant and Regret, Delivering Pressure

Tesla Q1 car delivery expected

Jonas expects Tesla to deliver 88,000 vehicles in the first quarter, the most optimistic of the six analysts surveyed by Bloomberg. He warned of “downside risks” in this expectation. He expects investors to focus on second-quarter demand developments, Tesla’s burning and Musk’s promise of a battery day in April.

Long before the outbreak, Musk warned in July that the first quarter of the year would be “difficult.” Zachary Kirkhorn, Tesla’s CFO, made the point on a fourth-quarter conference call at the end of January, noting that the auto industry is always subject to “seasonal effects.”

Although Tesla in January raised an exciting forecast that it would deliver more than 500,000 vehicles this year, the company said at the time that it was “in the early stages of understanding whether the outbreak could have a temporary impact on the company and how much impact it will have.”

In addition to the U.S. plant, Tesla’s Shanghai plant has resumed operations with the help of local governments. Tesla does not typically publish car deliveries by country or region.

“Given the closure of Chinese factories in February, the likely slow pace of production in March, and the closure of U.S. factories in The Month, we expect everyone to give dire expectations,” Morningstar analyst David Whiston said in an email. China and the U.S. accounted for 64% of Tesla’s annual revenue last year, so the collapse here will be painful. “

In mid-February, Tesla’s share price closed up 112 percent this year, at one point returning all of its gains in 2020 as the stock market tumbled. As of Tuesday’s close, Tesla’s shares were up 25 percent this year.