TSLA Tesla Inc

By Tim Higgins 

Elon Musk has long cast Tesla Inc. as a tech company, but the coronavirus pandemic -- and his battle to resume production -- show that the Silicon Valley car maker still has at least as much in common with Detroit as it does with the tech giants down the road.

The Tesla chief's decision to disobey California authorities and resume some work at the electric-vehicle maker's lone U.S. assembly plant has become the highest-profile standoff between business and government as the country debates how and whether to reopen the economy.

Mr. Musk has been on the floor of the San Francisco Bay Area factory this week to welcome workers back. He has dared authorities to arrest him or halt production. So far, they haven't.

Tensions between Mr. Musk and California officials have been steadily rising since Michigan Gretchen Whitmer last week said she was allowing factory work to resume. Ms. Whitmer's move cleared the way for General Motors Co., Ford Motor Co. and Fiat Chrysler Automobiles NV to bring back some employees this week and ready their North American factories with the stated goal of resuming vehicle production starting May 18.

When local authorities outside of San Francisco said Tesla's factory, idled since March 23, should remain closed, Mr. Musk grew defiant. It meant Tesla would be the only U.S. auto maker unable to get back to building cars. He called that disparity "insane."

For Tesla, one of the competitive risks from remaining shut while Detroit and others reopen is being able to quickly satisfy demand in an economic rebound. Rivals would be able to stock dealerships with new vehicles while Tesla rebuilt inventory.

The episode shows how companies that compete across state or national borders can be affected by governments' decisions about what can reopen and when.

This week GM is restarting parts-distribution centers, two engine factories and an upstate New York plant that makes radiators and other components, a spokesman said. Competitors in Europe have already begun resuming production.

Daimler AG's Mercedes-Benz factory in Alabama was the first major auto maker in the U.S. to return to work, on April 27, followed by BMW AG, Hyundai Motor Co., and Kia Motors Corp. plants in South Carolina, Alabama and Georgia, respectively, which started assembly lines at limited capacities on May 4.

Over the weekend, Mr. Musk launched a campaign to restart Tesla production amid a lockdown in Fremont, threatening to move headquarters out of state, and filing suit in federal court for clearance to reopen. On Monday, Mr. Musk said on Twitter that Tesla would resume production in defiance of lockdown orders -- creating a standoff with authorities who have given little indication how they plan to resolve it.

Politics have figured into the national debate over reopening. President Trump has lashed out at some states, such as Michigan, for their Democratic governors' handling of the coronavirus crisis. On Tuesday he voiced his support for Mr. Musk, posting on Twitter: "California should let Tesla & @elonmusk open the plant, NOW. It can be done Fast & Safely!"

Some of Tesla's corporate neighbors appear to be in no rush to get back to the office, partly because many of their employees can work remotely. Facebook Inc. and Google-parent Alphabet Inc. told workers last week they could continue working from home for the rest of the year, and Twitter Inc. said its employees could possibly do so indefinitely.

Tesla, however, needs an army of workers on an assembly line -- often working in physical proximity -- to build its cars. Tesla employs more than 10,000 people at the Fremont factory where it makes the hot-selling Model 3 compact car and other vehicles.

Before Mr. Musk's surprise reopening push, Tesla executives had been working with Alameda County, home to the Fremont factory, on a plan to restart manufacturing. Scott Haggerty, a county supervisor involved in the talks, said he thought the two sides were in agreement that vehicle assembly work could resume Monday, May 18 -- the same day other U.S. auto makers are set to resume production.

That timeline would still have left Tesla somewhat behind its Detroit rivals, since it would still have to perform some of the preparatory work for car assembly, which the other manufacturers are trying to accomplish this week. Tesla pushed to open a section of the plant where car components are stamped ahead of assembly, according to Mr. Haggerty.

To build its cars, Tesla takes delivery of rolled steel that is laid flat, cut into pieces and stamped into shapes with giant presses to create hoods, side panels and other parts. Most auto makers in the U.S. house stamping operations in separate factories from those where they assemble vehicles. Tesla does all that in the limited confines of the Fremont plant, which gives the company a big incentive to complete the preparations early and speed its ability to get cars out the door.

Alameda County, which has a population of nearly 1.7 million, has recorded 75 Covid-19-linked fatalities, according to state data, and is among the Bay Area's hardest-hit sections. Mr. Musk has publicly questioned the risks posed by the novel coronavirus.

Tesla buses in many workers from other counties, and local health officials were concerned such an influx could lead to more infections, Mr. Haggerty said, adding that the county was looking for ways to screen employees before they arrived on site. "There was a whole nuance of just trying to make sure that we could open the plant and not see a spike in cases or deaths," he said.

Tesla didn't respond to requests for comment about the negotiations.

Talks between Tesla and county officials were thrown into disarray when Mr. Musk began recalling workers last Friday and then filed the lawsuit Saturday.

In a letter sent on Monday, the county urged the company to cease work. "We hope that Tesla -- like other businesses who have been notified of non-compliance -- comes into compliance with the order without the need for additional enforcement measures," Colleen Chawla, director of the county's health-care services agency, wrote.

Late Tuesday, the county said it was reviewing Tesla's plan for reopening and was seeking additional steps. The county said once conditions are met, Tesla could conduct minimum operations to prepare for reopening "as soon as next week" -- without addressing the fact that Mr. Musk had said production has already resumed.

Tesla's workers are closely following the company's fight, several told The Wall Street Journal. In early April, the company furloughed without pay those whose jobs couldn't be done from home. Workers have been recalled in recent days, and a Tesla human-resources executive informed employees that operations would begin with limited staff, saying workers with concerns about coming back on the job wouldn't be penalized.

Some hourly employees were split on returning; one likened the shutdown to "economic suicide," while another expressed concern about how safe the car maker can keep its workers. Some workers worried of retaliation if they declined to show up for work. Others raised concerns about the pressure they'll face to make up for weeks of lost production to meet Mr. Musk's goals of boosting deliveries more than 36% this year.

Tesla has said it has added partitions and barriers to separate work areas and is screening employees for fevers at plant entrances. Start times might be staggered to space out worker arrivals. Before Saturday, a company memo said Tesla wouldn't let workers in if they have a temperature of 100.4 degrees or greater.

Asked how things went at the factory, on Tuesday Mr. Musk responded on Twitter: "Great."

--Mike Colias and Ben Foldy contributed to this article.

Write to Tim Higgins at Tim.Higgins@WSJ.com

(END) Dow Jones Newswires

May 13, 2020 14:28 ET (18:28 GMT)

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