Electric Egos: Tesla Founder Sues CEO

Busted sports car, press boasts figure in lawsuit seeking millions from electric-car chief

By Owen Thomas
|  Wednesday, Jun 10, 2009  |  Updated 10:11 PM PDT
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Tesla Motors CEO Elon Musk, shown here with a design concept for the still-unbuilt Model S electric car, is being sued by one of the company's founders.

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The egos of Silicon Valley grow as quickly as the startups that spawn in its office parks. That's why we shouldn't expect a quick end to the legal dispute Tesla Motors founder Martin Eberhard launched against the company's CEO, Elon Musk.

A 146-page lawsuit Eberhard filed against Musk in the Superior Court of California in San Mateo County is just the latest turn in the entrepreneurs' long-running feud, which began not long after Eberhard brought Musk in as an investor in his company in 2004, two years after Eberhard founded it.

Eberhard's complaints run the gambit from slander and lost wages to failure to repair Eberhard's car, which a Tesla employee crashed during testing before it was delivered to Eberhard.

Tesla is a big deal, closely watched in the Valley and beyond. The startup, which makes a $109,000 all-electric sports car called the Roadster, is seen as the best hope for establishing an electric-car industry in America away from the woes of Detroit.

In the lawsuit, Eberhard claims Musk deprived him of wages and stock options after ousting him as the company's CEO in 2007; failed to deliver the promised second Roadster to come off the product line, a rare model he says is potentially worth millions; and defamed him by blaming him for the Roadster's production delays and cost overruns.

Eberhard is also aggrieved over something that only Valley entrepreneurs would care about. He says Musk falsely claimed the status of a Tesla founder. That's the culture of Silicon Valley: Founders get the lion's share of credit for a successful startup, while investors merely get a payday.

In the suit, Eberhard also claims Musk has misrepresented his educational credentials. Musk, who is also the CEO of a space-technology startup called SpaceX, has often cited his background as a physicist in interviews. Eberhard says Musk never earned the bachelor's degree in physics he claims to have obtained at the University of Pennsylvania.

Musk has not responded to an email asking for comment on the lawsuit and Eberhard's claims. In the past, he has seemed determined to criticize Eberhard's management of the company. He once drove up to San Francisco in a Tesla Roadster to meet me at a bar and badmouth Eberhard, even claiming that Eberhard lied to Musk and the rest of Tesla's board of directors about the Roadster's costs, a claim Eberhard disputes. (Eberhard submitted my interview with Musk, published in the Silicon Valley gossip blog Valleywag, as a piece of evidence in his lawsuit.)

It's not clear why Eberhard -- or Musk, for that matter -- would want to be a glory hound over Tesla in its current state.

The company's finances are little better than General Motors or Chrysler. Last October, the company had only $9 million in cash left. It has since raised tens of millions of dollars from current investors, including Musk, and sold a 10 percent stake to Daimler for an unspecified amount. It is still far short of the hundreds of millions of dollars it needs to develop a new car called the Model S, for which it has taken more than a thousand pre-orders. It hopes to get $350 million in government-backed loans through a Department of Energy program -- just like the bailed-out giants of Detroit.

Tesla recently recalled 345 of the 500 Roadsters it has sold over a flaw that could cause the cars to crash.

Owen Thomas, the online editorial director of NBCBayArea.com, couldn't tell you what he and Musk drank that night, but he thinks Scotch was involved.

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