A whistleblower who accuses Tesla Motors of misleading investors and compromising customers’ safety will meet with the U.S. Securities and Exchange Commission (SEC) to review his allegations. Martin Tripp, a former Tesla technician, accuses Tesla of making multiple “material omissions and misstatements” to investors in addition to taking production measures that jeopardize customer safety. He formally submitted a whistleblower complaint to the SEC last month.
According to the Business Insider, which reviewed Tesla documents provided by Mr. Tripp, Tesla was “wasting a jaw-dropping amount of raw material and cash” in its Model 3 production line in Nevada.
The internal documents show that the company expects that as much as 40 percent of the raw materials Tesla used at its Nevada Gigafactory to make batteries and driving units need to be scrapped or reworked. So for every 2,500 battery packs and driving units that Tesla completes, an additional 1,000 “nonconforming” units have to be reworked. Half of the unused material is put into other car parts and the rest becomes scrap.
Rebecca Lindland, a senior director and executive analyst at Kelley Blue Book, told Business Insider that Tesla’s alleged practices seem “like just an awful lot of money” and raise questions for investors about transparency, how funds are being spent, and the sustainability of exorbitant scrappage rates.
Consumer Safety Compromised?
The alleged production practices described in the internal documents have troubling repercussions for consumers as well, particularly Tesla drivers.
Tesla’s internal records document problems with a misprogrammed production robot that handles battery modules for the Model 3. According to those records, the robot repeatedly punctured the batteries’ plastic casing, occasionally striking through the battery cells.
Another employee on the Model 3 production line told Business Insider that instead of scrapping those modules, some were fixed with adhesive and put back into the manufacturing line. The problem affected more than 1,000 pieces, internal production records show, and some of the punctured modules were put into hundreds of vehicles.
The repaired batteries raise questions about their stability and safety. Lithium-ion cells can expand with age and use, so any manufacturing flaws could potentially present a risk of overheating, fire, and explosion.
Tesla also lowered vehicle specifications with safety repercussions, including placing battery cells too close together and not affixing them properly, CNBC reported.
According to the Washington Post, Mr. Tripp also alleges that Tesla overstated to investors the number of Model 3 cars it was turning out each week by as much as 44 percent. He claimed that production information appearing on Tesla’s factory board was inflated.
Alleged Whistleblower Retaliation
Mr. Tripp’s public allegations and his impending meeting with SEC regulators have evoked heated responses from Tesla co-founder and CEO Elon Musk.
After Mr. Tripp went public with his whistleblower allegations, he says Mr. Musk characterized Mr. Tripp as a disgruntled former employee bent on harming the company because he was passed over for a promotion.
Mr. Musk, who called Mr. Tripp a “horrible human being,” has since filed a civil lawsuit against the whistleblower, claiming he hacked into the company’s manufacturing operating system, stole company data and valuable trade secrets, and lied to the press about Tesla’s operations.
Mr. Tripp has countersued Mr. Musk and Tesla, claiming they published “false and defamatory statements out of malice and to retaliate against” him and have worked to “discredit him before the general public.”
In a further example of what could turn out to be a case of whistleblower retaliation, Mr. Tripp’s lawyers said they have obtained law enforcement documents indicating Mr. Tripp may have been the target of a “SWATting” incident – a harassment tactic that involves duping an emergency service into sending law enforcement authorities to someone’s address.
On June 20, five days after Mr. Tripp was fired, someone called a Tesla call center in Las Vegas reporting a distraught former employee, identified by the caller as Mr. Tripp, had a gun and indicated he planned to shoot up Tesla’s Gigafactory in Reno.
That call set off a frantic manhunt for Mr. Tripp. He was eventually located at a casino and met with officers. Police who questioned Mr. Tripp at a pre-arranged location described him as traumatized by the events. According to Bloomberg, investigators found Mr. Tripp “visibly shaken and crying,” saying he was in fear for the safety of his wife and infant son because of Tesla’s alleged retaliation against him.
“They’re trying to do everything they can to silence me and trying to set an example so that no one else will talk to the press,” Mr. Tripp claimed.
Days later, investigators determined that Mr. Tripp was “not armed, did not likely have access to firearms, did not present a threat and that the ‘active shooter threat was not viable’ …” according to Bloomberg.
One of Mr. Tripp’s lawyers told CNBC that he has “never seen a company handle an employee who has raised issues internally in such an aggressive manner.”
“To me, this indicates that they are trying to send a message not just to Martin Tripp, but to all employees that they should not speak up if they see something wrong,” he said.