Tesla’s No Good, Terrible Month Raises Troubling Questions For Musk’s Empire

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Chris White Tech Reporter
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Tesla Motor’s June started with allegations of ethical improprieties, and ended with a Tesla auto-pilot collision that killed a man — the company’s July is probably not going to get any better.

Tesla owner Joshua Brown was killed Wednesday after his vehicle, a Model S, caromed into a tractor-trailer on the highway. Investigators have not determined the cause of the wreck, but eyewitness reports indicate Brown was watching a “Harry Potter” movie at the time of the accident.

Now, thanks to Brown’s death, industry analysts are reconsidering whether Tesla’s self-driving feature is even safe.

“The expectation of Tesla is that the driver is alert and vigilant, ready to take over at a moment’s notice,” Ryan Eustice, a professor of engineering at the University of Michigan tasked with researching Toyota’s autonomous vehicle project, told reporters Friday. “In practice, however, we see that humans quickly become bored and place too much trust in the system. People let down their guard and are not attentive and ready to take over.”

Bryant Walker Smith, a professor at the University of South Carolina School of Law, who devoted his career to studying semi-autonomous technology like that used by Tesla, echoed Eustice’s sentiments, telling reporters that Tesla owners will likely have to decide between safety and convenience.

“Is an automated system actually safer? The automated system plus an alert human driver is the safest,” Smith said. “The problem is people might be less likely to buy those technologies if they are only marketed as safety. If you market them as relaxation or multitasking, you don’t get the same safety benefit but you get the vehicles used and deployed more rapidly.”

Tesla’s self-driving feature essentially lulls the driver – or more appropriately, the passenger – into a false sense of safety, allowing them to zone out in the driver’s seat. How Tesla and other auto companies considering similar technology will react to the new problems remains to be seen. The reverberation is likely to cause Tesla immediate pain, as it is the only self-driving auto company on the market.

The death slammed the door on the devastating month for Elon Musk’s electric vehicle company, which started with Musk suggesting Tesla fuse with his other green company, solar panel producer SolarCity, prompting critics to wonder if such a move was even ethical.

The techno-wonder boy owns 22 percent in SolarCity – a company that derives most of its revenue from tax-subsidies – and 21 percent of debt-riddled Tesla. Musk claimed in a blog post on the Tesla website that the new company will be a one-stop shop for Tesla’s green energy-obsessed customers.

The proposal prompted a type of revolt from shareholders, many of which said the companies’ board of directors are infused, from top to bottom, with members of Musk’s family or inner circle.

CtW Investor Group, which holds 200,000 shares of Tesla, wants the beleaguered company to shake up its board of directors after discovering six out of seven board members with SolarCity have direct connections to Musk. In fact, Donald Kendall, chief executive of investment management firm Kenmont, is the only person on the SolarCity board without deep-rooted ties to the Tesla CEO. Subsequently, Kendall is one of only two people able to review the proposal.

The group, in a letter to Tesla Wednesday, demanded Tesla add two permanent independent directors to the board, separate the company’s chairman and CEO roles, and called for two independent directors to review the proposed SolarCity merger deal. It also wants the company’s governance guidelines to forbid immediate family members of the senior executive team from concurrently serving on the board.

“To be clear, this step would require the resignation from the board of Kimbal Musk,” the letter added. Kimbal Musk is the brother of Elon Musk and CEO of Internet software company Medium.

Tesla’s June got even worse after investors suggested Musk simply doesn’t know what he’s doing.

The SolarCity-Tesla merger keeps with Musk’s mode of operation, Salome Gvaramia, the COO of tech company research group Devonshire Research Group, told The Daily Caller News Foundation in June. Tesla’s complex and exotic business model is similar to a pyramid scheme, she added, wherein it relies on massive injections of capital from “loss-tolerant” investors unaware of what they stand to win or lose when buying into Tesla.

Gvaramia, whose group shorted Tesla in May after issuing a report stating the company is strikingly similar to disgraced energy firm “Enron,” also believes Musk fundamentally misunderstands the entire financial industry. She told TheDCNF at the time, this could lead to the downfall of Tesla and SolarCity, as well as the investors willing to sink money in the former.

“When a company’s executives misunderstand modern corporate finance and technology strategy, they can make profound miscalculations and errors of judgment; this will not be the last mistake Tesla’s management makes,” she concluded.

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