After resisting coronavirus order, Tesla will now end production in Fremont

Russ Mitchell
Tesla's car factory in Fremont, Calif.  (David Butow / For The Times)

Tesla will temporarily end production at its Fremont, Calif., assembly plant beginning March 23 to comply with San Francisco Bay Area restrictions amid the coronavirus outbreak.

The company made the announcement Thursday after days of controversy as Chief Executive Elon Musk kept the plant running full-tilt despite shelter-in-place orders from Alameda County, where Fremont is located.

“We have decided to temporarily suspend production at our factory in Fremont from the end of day March 23, which will allow an orderly shutdown,” the company said in a statement posted on its investor website.

The lockdown orders, issued jointly by six Bay Area counties, are in effect until April 7, although public health officials have said that date could change.

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The plant has about 10,000 workers.

Tesla’s solar energy factory in Buffalo, N.Y., will be temporarily shut down as well, the company said.

Hourly employees in the Bay Area and Buffalo factories will be put on paid leave starting Monday.

Tesla has cash on hand “sufficient to successfully navigate an extended period of uncertainty,” the company said, noting it held $6.3 billion in cash at the end of 2019 and raised $2.3 billion more in an issue of new stock last month. A more recent cash position will be revealed when Tesla releases first-quarter results in April.

Tesla's stock price, which had risen 18% to close at $427.64 on Thursday, quickly fell 9% in after-hours trading.

The shutdown will hurt cash flow, Morningstar stock analyst David Whiston said in an email. But he said because Tesla sells directly to consumers, rather than selling wholesale to dealers as other vehicle manufacturers do, “Tesla can keep recording sales for a short time by delivering already built vehicles to customers.… The immediate impact may not be as bad as some think, of course it’s not a good thing to be forced to stop production due to a health pandemic."

However, he said, “the cash burn will be severe if it lasts a long time.”

Tesla workers coming off the night shift on March 17 wait to board buses at the Fremont factory.  (Russ Mitchell / Los Angeles Times)

Tesla said in its statement that it had followed all legal obligations and “honored the federal government’s direction to continue operating.” (Tesla has never publicly documented that the federal government directed Tesla to continue operating.)

“Despite taking all known health precautions, continued operations in certain locations has caused challenges for our employees, their families and our suppliers,” the company said.

Earlier in the week, workers streamed into the factory, which was churning out cars as usual — the Model 3, the Model X, the Model S and the newest Model Y. The parking lot was filled to capacity Tuesday and dozens of shuttles and full-size buses ferried morning workers to the factory and took night-shift workers away. Departing workers packed shoulder to shoulder at the door of each bus.

More than a dozen Tesla Fremont factory workers had contacted The Times to complain about Tesla’s management of the pandemic at the plant. Many said they were afraid to risk infection if they came to work and afraid they’d lose their job if they didn’t.

Musk, who has criticized reaction to the pandemic as “dumb” and overblown, did give workers who felt sick permission to stay home. But the human resources department sent emails to employees telling them to report for work if they weren’t sick.

Some workers noted that the coronavirus can be spread by people who have not yet begun to feel ill.

What Tesla workers will be doing at the plant through March 23 is unclear, but it appears they may still be building cars. Tesla’s human resources department emailed employees Thursday to say, “You should continue to report to your current location through end of day Monday as current operations will continue over the next few days.”

The email said: “Starting Tuesday, March 24 we will transition to minimum basic operations to support our vehicle and energy service operations and customers, and Supercharging infrastructure, as directed by authorities."

Companies such as Tesla were told to restrict themselves to “minimum basic operations” under the county orders issued days ago.