Musk will replace Ze'ev Drori, who will remain at the company as vice chairman (see Musk Takes Over as Tesla CEO.)
In a blog post, Musk revealed that the electric carmaker will delay the launch of its second car, a four-door sedan called Model S, by six months. Tesla plans to launch Model S in mid-2011.
Money played a central role in Tesla's decision. Musk said the credit crunch and slumping economy prompted the executive change and shift in business focus. Tesla will have to wait for a loan guarantee from the U.S. Department of Energy to continue its Model S program. Funding won't be available until the company gets approval to build its new headquarters on 89 acres in San Jose, Calif., however, and that is scheduled for the second quarter of 2009.
"The DOE loan guarantee will cover most of the Model S program at a very low cost of capital compared with raising equity financing in what could quaintly be described as a ‘bear market,' " Musk said.
Tesla plans to use the extra time to improve the design and powertrain of the Model S "so that the car will end up being slightly better," he wrote.
Thanks to the recent success of his other company, Hawthorne, Calif.-based Space Exploration Technologies (SpaceX) Musk can allocate more time to Tesla, he said. SpaceX launched its first rocket into Earth's orbit in September – after three failed attempts – is about to enter its third year of profitability, he said.
The San Carlos-based company wouldn't disclose how many people it would lay off, but denied a Valleywag post Wednesday morning that reported the cuts would constitute up to half the company's roughly 250 employees, according to spokeswoman Rachel Konrad.
"It will definitely be dramatically less than what we've seen on the blogs this morning, and they will be strategically focused on operations that don't generate any revenue," Konrad said of the layoffs.
Musk said the layoffs will come from consolidating the company's operations, as the company moves its vehicle engineering group into its new headquarters and closes its Rochester Hills office near Detroit.
Tesla would focus its layoffs on operations at Tesla that aren't making money right now, and not on the company's revenue-generating Roadster production and powertrain sales operations, Konrad said. Tesla started delivering its sporty, $100,000 Roadsters to select customers this summer (see Tesla Delivers More Than a Dozen Roadsters).
The powertrain business is already profitable and "growing rapidly," Musk wrote in the blog.
Musk said Tesla's goal is to start making money within six to nine months. The company has to continue to boost its manufacturing pace, increase the Roadster sales and cut costs, he added.
It was only late last year that Drori took the reigns from an interim chief hired to replace Tesla's first CEO and co-founder Martin Eberhard, who left the company in August 2007. (See Tesla CEO Talks Cash and Speed.)
Eberhard told Greentech Media that he had been "disappointed" by his ouster from a company he had wanted to remain involved in (see Tesla Founder Ousted).
Konrad was quick to deny rumors that Drori's departure from the CEO position had any animosity behind it, however.
"There have been some reports in the blogosphere this morning that Ze'ev has been ousted - that's absolutely not true," she said. "He's expected to remain active and involved."
Last month, Tesla announced it was seeking $250 million to build a plant in San Jose to produce its next model, the $60,000 "Model S" sedan, which is expected to hit the streets in late 2010 (see Tesla to Make Model S in San Jose).
Tesla CEO Ze'ev Drori told the Wall Street Journal last month that he hoped to secure a round of private capital led by Goldman Sachs Group Inc., and a loan guarantee from the U.S. Department of Energy to finance the new plant.
But Drori also said in February that Tesla was open to working with large automakers to produce a third model, a compact sports car that Musk said would cost $30,000 to $35,000 (see Tesla to Big Three: Let's Be Friends).
Tesla closed a $40 million bridge loan in February, and Drori said then that he hoped to raise a fifth equity round of $75 million to $100 million this year and target an IPO early next year if market conditions improve.