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Tesla CEO Musk Morphs From Tony Stark to Henry Ford

July 16 (Bloomberg) -- Elon Musk, the billionaire chairman and chief executive officer Tesla Motors, will release designs next month for a system he has said would be capable of whisking people from Los Angeles to San Francisco via a tube. Cory Johnson reports on Bloomberg Television's "Bloomberg West." (Source: Bloomberg)

Elon Musk inspired Robert Downey Jr.’s portrayal of comic-book billionaire industrialist Tony Stark in the “Iron Man” films. The role model for Musk, a billionaire industrialist for real, appears to be Henry Ford.

The Ford Motor Co. (F) founder’s mastery of mass-production made the Model T the first affordable car, revolutionizing transportation. Musk, who named Tesla Motors Inc. (TSLA)’s sedan the Model S as a tip-of-the-cap to Henry’s car, sees himself similarly as an engineer, a tinkerer, a nitty-gritty entrepreneur.

“I don’t spend my time pontificating about high-concept things; I spend my time solving engineering and manufacturing problems,” said Musk, 42, in a factory-floor interview.

“Have you seen my desk? It’s right there in the middle of the factory,” he said, pointing to a drab workspace beside the Model S line. “It doesn’t look like Tony Stark’s office.”

Decade-old Tesla is an automotive phenomenon, with an industry-leading share price surge that erupted on the heels of its first quarterly profit, a rave Model S review by Consumer Reports magazine and rushed repayment of the Energy Department loan that got the company’s factory into operation. Beyond this year’s goal of selling 21,000 electric sedans, South African-born Musk wants to one day make a half-million battery-powered cars annually at California’s lone auto-assembly plant.

Photographer: Noah Berger/Bloomberg

“We’re quite vertically integrated,” said Elon Musk, co-founder and chief executive officer of Tesla Motors Inc. “We’re closer to the way Ford did it than Ford is” now. Close

“We’re quite vertically integrated,” said Elon Musk, co-founder and chief executive... Read More

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Photographer: Noah Berger/Bloomberg

“We’re quite vertically integrated,” said Elon Musk, co-founder and chief executive officer of Tesla Motors Inc. “We’re closer to the way Ford did it than Ford is” now.

Quarterly ‘Nightmare’

Tesla’s initial struggle to reach a production pace of 400 cars a week led it to miss a 5,000-car sales goal last year for the $69,900 Model S. The company’s fourth-quarter loss widened after it added temporary workers and resolved supplier snags. That output level has since been surpassed, and “not trivially,” Musk said.

“At this point, making 400 cars a week actually feels like a walk in the park, whereas it was a nightmare in Q4,” he said July 10, declining to elaborate ahead of Tesla’s release of second-quarter results.

Shares of Palo Alto, California-based Tesla have more than tripled this year amid its profitable quarter. That profit included a one-time benefit from repaying its U.S. loan early. Without it, Tesla earned less than half a cent per share.

The carmaker may report a second-quarter loss of 18 cents a share, excluding some items, the average of 12 analysts’ estimates compiled by Bloomberg. Tesla slid 14 percent to $109.05 the close in New York, the biggest one-day decline since Jan. 13, 2012, after Goldman Sachs Group Inc. set a target price of $84.

Photographer: Noah Berger/Bloomberg

A worker welds a Model S sedan chassis at Telsa Motor Inc.'s assembly plant in Fremont, California. Close

A worker welds a Model S sedan chassis at Telsa Motor Inc.'s assembly plant in Fremont, California.

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Photographer: Noah Berger/Bloomberg

A worker welds a Model S sedan chassis at Telsa Motor Inc.'s assembly plant in Fremont, California.

Rocket Man

Musk also runs rocket maker Space Exploration Technologies Corp., known as SpaceX, and is chairman of solar-power provider SolarCity Corp. (SCTY)

Gains for Tesla and SolarCity shares, along with expanding SpaceX business, have swelled Musk’s fortune to $6.9 billion, according to the Bloomberg Billionaires Index.

By late 2014, Tesla’s goal is to make 800 cars a week, before starting Model X electric sport-utility vehicle production, Musk said. The factory has 3,000 employees, including about 2,000 assembly workers, with two daily production shifts, he said.

The cavernous factory, pristine in early 2012, now is filled with activity. A once-spotless white floor bears smudges from accelerating production. Musk figures 40 percent of the facility’s 5 million square feet (465,000-square-meters) now are used for assembly of cars, electric motors, aluminum-encased battery packs and parts storage.

Overtime and temporary labor costs are falling as workers hone assembly skills, Musk said. Tesla is also making “nuanced” changes to the Model S to trim production time, cost and weight, he said.

‘Aerospace’ Bolts

Some practices were “way overkill,” Musk said, such as high-strength boron-steel inserts in the side pillars secured with “aerospace-grade bolts.” Those are being replaced with lighter, cheaper and easier-to-assemble aluminum reinforcements that maintain a five-star U.S. crash rating, he said. By year end, engineers will slice the Model S’s weight as much as 80 pounds (36 kilograms), Musk said.

Photographer: Noah Berger/Bloomberg

Telsa Motor Inc. Model S sedans exit an assembly line at the company's assembly plant in Fremont, California. Close

Telsa Motor Inc. Model S sedans exit an assembly line at the company's assembly plant... Read More

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Photographer: Noah Berger/Bloomberg

Telsa Motor Inc. Model S sedans exit an assembly line at the company's assembly plant in Fremont, California.

Tesla’s Fremont facility is highly self-contained compared with most large auto plants. It stamps its own aluminum body panels and chassis parts, molds plastic components and dashboards and even die-casts individual metal components.

“I’m not aware of other plants that do their own die-casting,” said Michael Robinet, managing director of consultant IHS Automotive in Northville, Michigan, who studies assembly practices. “That’s very difficult to do on-site.”

Tires, glass and stereo speakers are among the few things the plant doesn’t make itself.

‘Vertically Integrated’

“We’re quite vertically integrated,” Musk said. “We’re closer to the way Ford did it than Ford is” now.

Henry Ford built the world’s largest vertically integrated auto facility, the Ford River Rouge Complex, in Dearborn, Michigan. The complex, completed in 1928, had its own steel foundry, coke ovens, glass furnaces and a cluster of other shops making every vehicle part.

Ford and other automakers ultimately abandoned the self-contained approach, finding that suppliers could improve production efficiency.

“Tesla is really bucking the trend,” Robinet said. “It will be difficult for them to gain economies of scale as they expand if they don’t work more closely with the supply base.”

Tesla straddles technology and autos. Its entrance into the Nasdaq 100 this month demonstrates its tech-industry bona fides.

‘Mundane Pieces’

Bill Ford, great-grandson of Henry Ford and executive chairman of Ford Motor, said managing the flow of parts will be a challenge as Tesla grows.

“I love their technology,” Bill Ford said April 30 at a conference in Beverly Hills. “They need to be mindful as they scale up that running a car company is different than running a technology company. Some of the mundane pieces, like supply-chain management and keeping dealerships stocked with parts, aren’t very sexy, but they are very real.”

Most suppliers of parts and materials for Model S were hassle-free, Musk said. About 5 percent were “slightly problematic; 3 or 4 percent were problematic; and 1 or 2 percent of them were a nightmare,” he said.

“We still have a lot to learn and can get a lot better, but I think we’re pretty good at this point managing the supply chain for tens of thousands of units a year,” he said. “We’re going to really have to step things up.”

To contact the reporter on this story: Alan Ohnsman in Fremont, California at aohnsman@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net

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