Musk Warns Tesla Shareholders To Expect “Challenging” Year

Elon Musk, the chief executive of Tesla, warned shareholders Tuesday to expect a difficult year because of an unsteady global economy and high interest rates.

“This is going to be a challenging 12 months,” Mr. Musk said at Tesla’s annual shareholder meeting. He added, “Tesla is not immune to the global economic environment.”

Mr. Musk’s pessimistic forecast came in an otherwise upbeat presentation to a friendly crowd at Tesla’s factory in Austin, Texas. He largely ignored criticism by activist investors on a variety of issues, including allegations of racial discrimination at its California factory, and whether the company was hostile to labor unions or its board was doing a good job overseeing management.

He did, however, respond to activists by promising that Tesla would investigate whether any suppliers of cobalt, a battery raw material, were using child labor.

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“We will do a third-party audit,” he said, shortly after Courtney Wicks, the executive director of Investor Advocates for Social Justice, asked shareholders to vote in favor of an inquiry into cobalt mining.

“In fact,” Mr. Musk said, “we’ll put a webcam on the mine. If anybody sees any children, please let us know.”

Shareholders confirmed the company’s nomination of J.B. Straubel to its board despite criticism from activist investors that he was too close to Mr. Musk. Last month eight investment funds and activist groups called on Tesla shareholdersto reject the nomination of Mr. Straubel, who was a senior executive at Tesla for years before leaving to start a battery recycling and materials company in 2019. Mr. Straubel “is clearly a company insider and not an appropriate choice for a board that already has a dearth of independence,” the investors wrote.

Activists also complained that they were not able to introduce as many shareholder proposals as they did at previous shareholder meetings because of what they characterized as a deliberate attempt by the automaker to suppress dissent.

In October, Tesla moved up its annual meeting from August to May and gave shareholders two fewer months to file proposals. Tesla announced the new deadline for proposals, Dec. 22, at the end of a 60-page regulatory filing, and most activist investors overlooked the change.

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“It was really sneaky,” said Kristin Hull, the chief executive of Nia Impact Capital, a firm in Oakland, Calif., that previously challenged a Tesla policy requiring employees to resolve complaints of discrimination before an arbitrator rather than in court.

Tesla did nothing wrong in moving up the deadline, according to a decision by the Securities and Exchange Commission.

Mr. Musk and Tesla’s board members have dismissed activists’ complaints about discrimination and pointed to the company’s strong profits and sales growth as evidence that it is performing exceedingly well.

Some investors saw signs that Mr. Musk was responsive to some of the shareholder criticism when he announced last week that he would name Linda Yaccarino as chief executive of Twitter, the social media company that Mr. Musk acquired last year. Hiring Ms. Yaccarino could free Mr. Musk to spend more time managing Tesla. Investors have complained that Twitter has distracted Mr. Musk from Tesla at a time when the carmaker faces slackening demand and increased competition, which have led it to cut prices.

Tesla also faces criticism from Washington. A group of eight senators led by Richard Blumenthal, a Connecticut Democrat, called on Tesla this month to stop requiring employees and car buyers to resolve complaints before arbitrators.

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The practice, the letter said, “prevents workers and consumers from bringing discrimination claims and consumer safety complaints to court — effectively shielding the company from both accountability and public scrutiny.”

Mr. Musk was clearly more interested in talking about Tesla’s plans to eventually make 20 million cars, twice as many as the world’s largest automaker, Toyota, produces in a typical year. He said Tesla would unveil two new models soon, without giving details. And he insisted that, when the economic downturn is over in a year or so, Tesla would be stronger than its competitors.

“The good times follow the bad times,” he said.

Kernel Reporter

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