Musk’s Histrionics Boost Stakes Beyond Covid-19

Re-opening Tesla’s California plant over authorities’ wishes, the CEO has another big card in his hand.

Elon Musk

Elon Musk’s Howard Beale moment this week—over re-opening of the Tesla factory in Fremont, California—has added yet another chapter to one of the most truly spectacular and riveting business careers in history.

Musk’s defiance of California governments’ stay-at-home orders also gives America’s governors even more to think about once they pivot from managing their own states’ stay-at-home orders to longer-term concerns about economic development.

Even before he indicated he may pull existing production out of California, Musk was dangling the prospect of putting a new pickup-truck plant in some other state as well. But while governors may want to bring Musk to a car show, a convention of the Planetary Society or even Thanksgiving dinner, will they actually want to extend hundreds of millions of dollars of tax breaks, infrastructure improvements, worker-training grants and other goodies to the most unpredictable CEO this side of Travis Kalanick?

When Tesla’s founder and CEO told the Alameda County health authorities to stick it, and that he was going to crank up production of Model 3’s again this week without their blessing, Musk far exceeded the chutzpah demonstrated by Beale, the fictional hero of the movie Network, who of course said, “I’m mad as hell, and I’m not going to take it anymore!”

“I will be on the line with everyone else,” Musk infamously tweeted on Monday in declaring that Tesla was “restarting production today against Alameda County rules.” He added, “If anyone is arrested, I ask that it only be me.”

Musk last week had railed at the county and state pandemic stay-at-home orders as “fascist” and “anti-democratic” and likened them to “forcibly imprisoning people in their homes.” In addition to what seemed to be his genuine concerns about civil liberties, of course there is the matter that his car-making company finally is on a profitable roll, and he stands to make a bundle personally if that can continue. At the same time, Musk was seeing that Midwestern governors and counties were giving the all-clear signal to legacy automakers including General Motors, Ford, Toyota and Honda to restart production as early as this week.

On Wednesday morning, the county relented, sort of, pretending to ignore Musk’s social-media outburst and the fact that the plant already was creaking back to life. “We will be working with the Fremont Police Department to verify Tesla is adhering to physical distancing,” the county said, “and that agreed-upon health and safety measures are in place for the safety of their workers as they prepare for full production.”

The Fremont plant once assembled Toyotas, and Musk initially retrofitted it for making his first electric cars even though California’s high taxes and heavy-handed regulatory approach have choked out many manufacturers over the years. But Musk has been chafing at authorities’ continued prohibition of output amid Covid-19 even as Tesla has been installing safety equipment and designing physical-distancing procedures for when the plant reopened. And last week, Tesla sued Alameda County.

Where the ears of governors—including California Governor Gavin Newsom—began perking up was the moment when Musk accompanied filing of the lawsuit with this tweet.

“Frankly, this is the final straw. Tesla will now move its HQ and future programs to Texas/Nevada immediately. If we even retain Fremont manufacturing at all, it will be dependent on how Tesla is treated in the future. Tesla is the last carmaker left in CA.”

Now, Texas, Nevada and perhaps other states can ponder the possibility of landing not only Tesla’s production of a new vehicle but also the assembly of some of its existing ones. And no governor can resist the economic-development allure of manufacturing facilities that occupy millions of square feet and create thousands of jobs – even if they’re tied to someone as mercurial, and indeed as other-worldly, as the founder of Tesla and SpaceX.

“Auto-assembly plants are so sought after because they bring a really high economic multiplier for jobs in the overall economy and downstream impacts for employees, at suppliers and on retail and service businesses,” said Bernard Swiecki, assistant director of the business group at the Center for Automotive Research in Ann Arbor, Michigan. “And development people believe that the right deal, with clawbacks [of financial incentives where earmarks aren’t reached], can expose them to fewer risks” from dealing with Tesla.