Things that make you go hmmm. I am segueing from quoting Seinfeld in my last column to quoting C+C Music Factory today.
On Thursday I wrote about General Electric (GE) , a stock where there is no hmmming necessary. GE's board should accept the inevitable, omit the dividend, and I would take advantage of the temporary stock plunge that would accompany such a move and for the first time buy GE for my clients.
Other companies are far more inscrutable, however, and none more so in the stock market than Tesla (TSLA) .
Tesla shares are hovering near $300, and badly lagging the roaring Nasdaq this year, owing to the inscrutability of the company's Chairman and CEO Elon Musk. He and I were born a few months apart, and I can relate to the fact that he likes to do things his own way. There certainly is no major U.S. public company CEO like him, in or outside Silicon Valley.
The issue is that unlike my small firm, Portfolio Guru LLC, Tesla is a massive global company, and the CEO is team leader, not team incarnate. I have spent 26 years of my life following auto companies and their stocks, and I can tell you that the CEO is one of the least important positions at any global automaker. Really.
Musk has no background in automotive engineering, and while it is sometimes difficult to find senior executives at Tesla that do, making a car requires an incredible amount of collaboration. Before its recent purging of 9% of its workforce, Tesla reported a total headcount of about 40,000 employees. My sources at Tesla tell me that most of those culled came from the troubled SolarCity division, anyway, so the car company is still a massive employer.
Tesla is people-heavy, as legendary auto exec Bob Lutz noted in an interview with CNBC this week. Lutz quoted a figure of 9,000 employees at Tesla's Fremont, Calif. facility, and that excludes the folks at Tesla's Gigafactory 1 plant in Sparks, Nev., where it produces powertrain assemblies in addition to lithium-ion batteries in conjunction with Panasonic (PCRFY) . In contrast, a quick check of Volkswagen's (VLKAY) website shows this quote: Every weekday, 642,292 employees worldwide produce around 44,170 vehicles, and work in vehicle-related services or other fields of business.
At that level of productivity, Tesla would produce about 500,000 cars per year. While Musk has quoted that half a million figure as his estimate of Fremont's potential production, that facility will, by my estimates, produce less than half of that number this year.
So, Tesla's per-employee productivity is lagging, and that, as Lutz pointed out in his interview, is a driver of Tesla's extraordinary cash burn over the past two years.
As an idea Tesla is terrific and that has allowed Musk to build a core of friendly institutional shareholders (albeit a shrinking one as shown in second-quarter 13-F filings) in addition to the cadre of individual shareholders that love to bombard me with pro-Tesla emails. As a company Tesla is an absolute mess. The very people that could help Musk fix that mess are leaving in droves -- the latest being Liam O'Connor, VP of global supply management, whose resignation was reported by Bloomberg Thursday.
So that's a thing that makes me go hmmm. I see so many senior executives leaving Tesla, I see so many auto suppliers and tech companies joining forces in the race to produce autonomous vehicles while Tesla goes it alone, and I see Musk doing all sorts of things instead of sleeping on the sofa in his office at Fremont every night.
It doesn't add up from a human resources perspective, and as I mentioned above, it takes quite a few talented humans to run a global car company. I am still waiting for Musk to figure that out.