Grohmann had disagreed with Musk's demands to focus management attention on Tesla projects to the detriment of Grohmann Engineering's legacy clients, including German carmakers Daimler and BMW, Reuters reported on Thursday.

Originally, Tesla had planned to keep Grohmann on, and Grohmann wanted to stay, but the clash with Musk over how to treat existing clients had resulted in his departure on March 31, two sources familiar with matter told Reuters.

Klaus Grohmann declined to comment on the circumstances of his leaving, citing confidentiality clauses, the agency noted, quoting Grohmann however as saying: "I definitely did not depart because I had lost interest in working."

Asked about Grohmann's departure, a Tesla spokesman praised the former founder of Grohmann Engineering for building an "incredible company."

"Part of Mr. Grohmann's decision to work with Tesla was to prepare for his retirement and leave the company in capable hands for the future. Given the change in focus to Tesla projects, we mutually decided that it was the right time for the next generation of management to lead."

'Order of magnitude' or rivalry

Tesla started out as a client of Grohmann Engineering, which is a small unlisted company based in Pruem, Germany, and designs highly-automated factories.

As pressure grew to increase production volumes at Tesla, Musk decided to buy the firm and make Pruem a base for Tesla Advanced.

In addition to Tesla's German car manufacturing rivals BMW and Daimler, Grohmann also counts the auto parts maker Bosch, chip maker Intel, as well as pharmaceutical firms Abbott Laboratories and Roche among its clients.

Negotiations reportedly started with some of the clients about how to compensate them for lack of resources devoted to their projects.

The Silicon Valley luxury electric carmaker is counting on Grohmann Engineering's automation and engineering expertise to help it ramp up production to 500,000 cars per year by 2018.

After announcing the buy-out in November, Tesla said its factory for building its new mass market Model 3 car was so important that it would "ultimately deserve an order of magnitude more attention in engineering than what they produce. At very high production volumes, the factory becomes more of a product than the product itself."

Labor trouble brewing?

The head of Grohmann's works council, Uwe Herzig, said the founder's departure had been sudden and he had not had a chance to speak with Tesla Grohmann's new management, despite efforts to reach out.

"In November we were told that everything would remain the same, and then on March 31 we were surprised to hear that he will retire," Herzig told a news conference on Wednesday.

In order to forego tension with Grohmann workers, Tesla in March offered employees a pay raise of 150 euros ($162) a month, which was followed up just before Easter with an offer of 10,000 euros in stock options for four years, and a pledge to guarantee jobs for five years. Tesla also said it would aim to create an additional 1,000 jobs.

Germany's powerful metalworkers union, IG Metall, said job guarantees and the offer of stock options had significantly reduced the prospect of a strike. Still, the union is demanding a collective wage bargaining contract and improved pay, complaining that pay at Grohmann is 25 to 30 percent below an industry-wide collective agreement.

Herzig told Reuters that Grohmann employees want "additional guarantees given in more formal ways" as the workforce needed "reassuring given the recent changes."

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uhe/kd (Reuters)