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By CCN.com: Trying to make heads or tails of Tesla’s financial footing continues to be a task. The good news for Elon Musk keeps getting trumped by worrisome, if not flat out bad news.
This month is proving to be a trying one for Tesla founder and CEO Elon Musk. It’s enough even to give Tesla’s legion of fanboys a headache. From not delivering enough vehicles to satisfy Wall Street players, to having to lay off workers, Musk is making moves that are humbling.
Laying Off 3,000 American Workers, Building a $2 Billion Gigafactory in China
Tesla’s recent lay offs came just after Tesla announced it was building its first gigafactory outside the United States in Shanghai. The gigafactory will cost around $2 billion according to Reuters. CCN reported that Tesla would be laying off more than 3,000 of its 45,000-strong workforce in the United States.
The layoffs affect workers at Tesla and SpaceX, which Musk also founded. Then the elephant in the room appears, Tesla got $1 billion in debt which is due March 1st. Aggravating the situation is the structure of the debt deal, which could seriously hurt the company’s cash balance.
All this just after Tesla reported news that should have sent its stock higher. During the fourth quarter of 2018, Tesla delivered a record number of vehicles. The figure was 90,700 to be exact. That was just 2,000 units shy of expectations.
Disappointed, knee-jerk reactor investors and traders sent the stock lower.
Tesla’s Major $1 Billion Debt Problem
According to regulatory filings with the U.S. Securities and Exchange Commission, the Tesla debt coming due March 1st entails $920 million of convertible senior notes.
The equity-conversion price is $359.88, Bloomberg reported in December. The problem for Tesla is that it has not traded above that price since December 2018.
If Tesla’s stock is below the $359.88 price by March 1, the notes must be paid in cash to the note holders. If the stock’s price goes above $359.88, the notes could be converted into equity shares, according to Business Insider.
Business Insider reported in October 2018 that Tesla had a total of $2.2 billion cash on hand (June 2018). If Tesla has to pay the expiring debt in cash, they would reduce their cash balance by nearly 50%.
Michael Ramsey, an automotive analyst at Gartner, told Business Insider:
“They very likely are going to have to borrow more money”
For Tesla, When It Rains, It Storms
News of the nearly $1 billion in debt coming due came on the heels of Tesla putting thousands of workers out of work.
On Friday, Musk sent a letter to Tesla employees about the coming pink slips. He explained that starting around May, the company will ramp up its effort to deliver more affordable Model 3s. The Model 3s were supposed to be the most affordable in Tesla’s fleet.
The need for cheaper Model 3s becomes even more significant on July 1, when the US tax credit Tesla received drops in half, according to Musk. Musk wrote that the drop would make its car
“$1,875 more expensive, and again at the end of the year when it goes away entirely.”
Here’s an excerpt:
“… we, unfortunately, have no choice but to reduce full-time employee headcount by approximately 7% (we grew by 30% last year, which is more than we can support) and retain only the most critical temps and contractors. Tesla will need to make these cuts while increasing the Model 3 production rate and making many manufacturing engineering improvements in the coming months.”
The goal is to achieve economies of scale required to make the Model 3 at $35,000. “There isn’t any other way,” Musk states.
This brutal comment is in stark contrast to other bullish statements from Musk.
Elon Musk Might Be Losing It
Take what he said about the SEC, for example. In December, he said on news show 60 Minutes:
“Let me be clear: I do not respect the SEC. I do not respect them.”
Musk was smarting over the regulator stripping him of his role as chairman of Tesla’s board. The SEC fined Musk $20 million for tweeting he was taking the company private at $420 a share. Pot enthusiasts quickly deduced the “$420” in reference to “Weed Day.”
Am considering taking Tesla private at $420. Funding secured.
The Food and Drug Administration (FDA) says that e-cigarettes face an uncertain future in U.S. markets unless youth smoking rates drop over the next year.
Speaking at a public hearing Friday in Silver Spring, Md., FDA Commissioner Scott Gottlieb said he could see the entire category of e-cigarette and vaping products removed from store shelves if companies don’t stop marketing such products to youth.
“I’ll tell you this. If the youth use continues to rise, and we see significant increases in use in 2019, on top of the dramatic rise in 2018, the entire category will face an existential threat,” he said.
Gottlieb pointed to data from the agency indicating that youth vaping rates had nearly doubled over the last year due to the increased availability and convenience of e-cigarette products. In his remarks, Gottlieb singled out e-cigarette brand Juul as a top choice among high school and middle school students.
“This progress is being undercut — even eclipsed — by the recent, dramatic rise in youth vaping,” Gottlieb said of declining numbers of traditional smokers. “A few years ago, it would have been incredible to me that we’d be here, discussing the potential for drug therapy to help addicted youth vapers quit nicotine.”
E-cigarette use spiked 78 percent among high school students and 48 percent among middle school students over the last year, the FDA says. Altogether, about 1.5 million young people took up the habit from 2017 to 2018, despite the Trump administration’s efforts to curtail youth vaping.
The FDA has the ability to stop e-cigarette sales and mandate that producers go through a formal FDA approval process, though it has not yet done so, NBC News notes.
A spokesman for Juul told The Hill on Friday that the company condemned any use of its products among minors.
“Underage use of JUUL and any other vaping products is completely unacceptable to us and is directly opposed to our mission of eliminating cigarettes by offering existing adult smokers a true alternative to combustible cigarettes,” said Ted Kwong, a Juul Labs spokesman.
“We are moving full steam ahead on implementing our action plan to limit youth usage, and this is unchanged since we announced our plan in November,” he added. “We will be a transparent, engaged, and committed partner with FDA, state Attorneys General, local municipalities, and community organizations in the effort to combat underage use.”
Michael Rittershaus’ wife texted him from Gretna, right before his Southwest Airlines jet landed.
Stephanie wanted him to drive carefully. She had tried to park in the driveway, and it was too slick.
Rittershaus said he wondered to himself if they had de-iced the runway. Soon, the plane landed, and he realized that it was no ordinary conclusion to the flight.
The plane slid off the runway.
“It wasn’t too scary,” said Rittershaus, who was returning from a business trip in California with a stopover in Las Vegas. “Yep. Apparently it was icy out.”
None of the 150 passengers and six crew members on Flight 1643 from Las Vegas were injured, said Steve McCoy, manager of airport affairs at the Omaha Airport Authority.
The plane landed in Omaha at 2:02 p.m., a short time after freezing drizzle had begun to coat roads, sidewalks and vehicles. The airport was closed for about 2½ hours after the incident, reopening about 4:40 p.m., and a small number of flights were diverted and canceled Friday afternoon.
Benny Salz, 30, a passenger, said that after the plane touched down, it felt like the aircraft moved in an S-shape before straightening out.
“Then all of a sudden it kind of felt like it hit a black ice patch, and then it went sideways,” said Salz, a producer in Los Angeles who was back in Omaha for a visit.
McCoy, the airport affairs manager, said crews had been working on treating Eppley’s runways since the start of the freezing drizzle earlier in the day.
Sarah Smith was traveling Friday with her husband, Andy Lee, and their three small children from Alamo, California, for a niece’s birthday party. Like many passengers, she said Friday’s ordeal was mostly calm.
“You could just tell you were sliding a little bit, and then a little bumpy near the end,” she said.
Passengers said they stayed on the plane for about an hour after it slid off the end of Runway 14R. Stairs were eventually brought to the aircraft, and passengers were taken by bus back to the terminal, where they were briefly sequestered in a conference room.
Smith said her children didn’t seem to notice that anything was amiss.
“I don’t think they even realized what happened,” she said.
Philip Baris, 57, came to town from Los Angeles for a wedding. He had a window seat and said he knew that the landing didn’t go right when he saw ice.
“We came to somewhat of an uneven stop,” he said. Baris said the plane wasn’t going very fast when the slide occurred. “Everybody was cool. Crew was cool.”
Rittershaus, of Gretna, texted his wife as soon as he realized what had happened. “We just slid off the runway. No emergency,” he informed her.
Her response: “Call me when you can.”
The passengers were offered lunch, but Rittershaus declined. He only had carry-on luggage and, after a brief discussion with airline employees and a bit of paperwork, he headed home.
He wanted to do something about that slick driveway.
World-Herald staff writer Bob Glissmann contributed to this report.
Eppley Airfield is currently CLOSED after Southwest Airlines flight 1643 exited the end of Runway 14R following a landing in Omaha. All flights are currently suspended. Please check with your individual airline for flight status.
I’m at Eppley Airfield, where an inbound Southwest flight from Vegas went off a runway this afternoon. An officer here said passengers are being gathered in a conference room (just down the hall from the gray dividers). He said media won’t be allowed to interview them @OWHnewspic.twitter.com/B5SPsuVwtI
This is Miranda Engelkamp. Her sister Sarah Smith was on the flight with her husband and three children. Engelkamp said her sister told her that she didn’t realize the plane was sliding at first. “It was a bumpier landing than normal,” her sister told her. pic.twitter.com/T0HPI5UHjF
Benny Salz, 30, is a producer in LA. He’s back visiting his hometown (Omaha). He said after the plane touched down, it felt like it went in an s-shape before straightening out. “And then all of a sudden it kind of felt like it hit a black ice patch and then it went sideways.” pic.twitter.com/wfGKA6T6mt
Steve McCoy, manager of airport affairs for Omaha Airport Authority, just spoke to media. The plan “landed safely” at 2:02pm then slid off the end of the runway. He said crews are working to reopen the runway, which could happen “very soon.” He said he couldn’t be more specific.
Sarah Smith was traveling w her husband Andy Lee & their 3 small children from Alamo, Calif. for a niece’s bday party. Like many passengers I’ve spoken to, she said ordeal was mostly calm. “You could just tell you were sliding a little bit and then a little bumpy near the end.” pic.twitter.com/geXB2xK7yA
Philip Baris, 57, was coming from LA for family friend’s wedding. He had a window seat & knew landing didn’t go right when he saw ice. “We came to somewhat of an uneven stop.” Said the plane wasn’t traveling very fast when the slid occurred. “Everybody was cool. Crew was cool.” pic.twitter.com/2uEiumzCKa
Passengers are loaded off a Southwest airplane a few at a time as firefighters help them down the portable stairs on Friday, Jan. 18, 2019, in Omaha, Nebraska, at Eppley Airfield. The airplane had slid off the runway as freezing drizzle hit the Omaha area. RYAN SODERLIN/THE WORLD-HERALD
A Southwest Airlines plane slid off the end of a icy runway after landing at Eppley Airfield on Friday afternoon.
Passengers, who were loaded off a Southwest airplane that slid off the runway, are transported off the runway by buses on Friday, Jan. 18, 2019, in Omaha, Nebraska. The airplane had slid off the runway as freezing drizzle hit the Omaha area. RYAN SODERLIN/THE WORLD-HERALD
Some flights were canceled or diverted after the mishap. An airport official said workers had been treating the runways since the freezing drizzle began Friday.
Blake Karlin, a law student at Creighton walks home from the Douglas County Courthouse along an icy Farnam Street sidewalk as winter storm conditions hit Omaha, Nebraska, Friday, January 18, 2019. BRENDAN SULLIVAN/THE WORLD-HERALD
Icicles form along S. 16th Street as winter storm conditions hit Omaha, Nebraska, Friday, January 18, 2019. BRENDAN SULLIVAN/THE WORLD-HERALD
A man and woman help each other cross Farnam Street.
A vehicle’s windshield is covered with a Frost Guard.
A man cross an icy street near the intersection of 17th and Douglas Streets while winter storm conditions arrive in Omaha.
A woman is seen through an art piece called “Fire in the hole” as winter storm conditions arrive in Omaha.
A man walks along a slick sidewalk on Douglas Street.
Jake Lyons scrapes the ice off of his car in Dundee on Friday, January 18, 2019. The Omaha area experienced freezing rain. CHRIS MACHIAN/THE WORLD-HERALD
Traffic heads west on Interstate 80 looking west from the 36th Street bridge.
A Nebraska Department of Roads truck heads east on Interstate 80 looking west from the 36th Street bridge on Friday, January 18, 2019. CHRIS MACHIAN/THE WORLD-HERALD
Jake Lyons scrapes the ice off of his car in Dundee on Friday, January 18, 2019. CHRIS MACHIAN/THE WORLD-HERALD
A car on 13th Street is seen through an ice covered car window on Friday, Jan. 18, 2019, in Omaha, Nebraska. RYAN SODERLIN/THE WORLD-HERALD
Raymond Hicks and his wife Allison Hicks, of southern California, hold hands while walking along a slick sidewalk on Douglas Street near S. 16th Street as winter storm conditions hit Omaha, Nebraska, Friday, January 18, 2019. BRENDAN SULLIVAN/THE WORLD-HERALD
A pedestrian crosses Farnam Street near S. 14th Street as winter storm conditions hit Omaha, Nebraska, Friday, January 18, 2019. BRENDAN SULLIVAN/THE WORLD-HERALD
Salt and ice blanket a sidewalk on South 16th Street near Farnam Street as a winter storm hits Omaha on Friday, Jan. 18.
A woman walks a dog north on S. 16th Street near Douglas Street as winter storm conditions hit Omaha, Nebraska, Friday, January 18, 2019. BRENDAN SULLIVAN/THE WORLD-HERALD