A Tesla employee who committed “extensive and damaging sabotage” by breaking into software systems at Tesla’s auto plant could be part of a larger plot by enemies bent on the company’s destruction, Chief Executive Elon Musk told employees via email Sunday.

“As you know, there are a long list of organizations that want the company to die,” Musk said in the note, sent out Sunday at 11:57 p.m. and reported by CNBC. He listed short sellers, the oil and gas industry, and car companies as possible culprits.

In a different email to employees Monday morning, Musk hinted that a small assembly line fire a day earlier might be part of a plot and told workers to remain alert. “Could be just a random event, but as Andy Grove said, “Only the paranoid survive.”

It was another reminder of the turmoil sweeping Tesla these days as it scrambles to ramp up production of the new Model 3 sedan and produce a profit. The company recently took just three weeks to get a third Model 3 assembly line up and running under a large tent-like structure at its Fremont, Calif., factory. At the same time, it has laid off 9% of its workers, the biggest layoff in its 15-year history.


Tesla stock sank nearly 5%, to $352.55, Tuesday — but analysts attributed that more to the Trump administration’s trade war with China, which could hamper Tesla plans to build a factory there. Steve Man, a senior autos analyst for Bloomberg Intelligence in Hong Kong, said protectionist U.S. levies “could derail automakers’ plans to open new manufacturing and export bases in China.”

Tesla is racing to reach agreement in China before that happens, said Michael Dunne of ZoZo Go, an investment advisory company specializing in China. “Without a doubt, trade tensions will accelerate Tesla’s plans to produce in China.”

Musk recently tweeted that short sellers — who bet that a stock will decline and who have made Tesla one of the most shorted stocks on Wall Street — “have about three weeks before their short position explodes.” That’s about when Musk has said to expect a China-related announcement, which some analysts believe could include new equity investors.

Musk’s invocation of Grove, the late Intel co-founder and one of Silicon Valley’s most revered pioneers, comes as Tesla faces increasing pressure to fix severe production problems stalling its electric Model 3 sedan, to start making money and to bring in enough cash to keep the company afloat.


Grove, who died in 2016 at age 79, employed a hyper-competitive management style to turn chipmaker Intel from a scrappy startup into an international mega-corporation. His 1996 book, “Only the Paranoid Survive,” is practically required reading for students of Silicon Valley.

What prompted Musk’s paranoia, he said in the Sunday night email, was learning over the weekend about employee sabotage. A worker upset at being passed over for a promotion, he said in the Sunday email, made “direct code changes” to Tesla’s manufacturing operating system “under false usernames” and exported “large amounts of highly sensitive data to unknown third parties.”

A manufacturing operating system, put simply, connects robots and other computerized equipment on a factory’s assembly lines. Tesla has pushed aggressively into factory automation but has suffered fundamental breakdowns on parts of the Model 3 assembly line, which had to be disassembled and replaced with redesigned systems.

The employee is being investigated, Musk said in his memo, adding: “We need to figure out if he was acting alone or with others at Tesla and if he was working with any outside organizations.”


“Wall Street short-sellers have already lost billions of dollars and stand to lose a lot more,” he said. Oil and gas companies “are sometimes not super nice” and “don’t love the idea of Tesla advancing the progress of solar power & electric cars.” And if car companies are willing to cheat on emissions, “maybe they’re willing to cheat in other ways?”

Musk offered no evidence that any short seller or company was involved in sabotage. The level of damage inflicted on the manufacturing operating system was not addressed. Asked for elucidation, a Tesla spokesman said “no comment.”

The small, quickly extinguished fire on the Model 3 assembly line further aroused Musk’s suspicion. He asked employees to be “on the alert for anything that’s not in the best interests of this company.”

Tesla’s Fremont plant, had a history of labor strife when it was run by General Motors, with a renegade workforce that was known to sabotage cars by, for example, putting cola bottles behind door panels to rattle car buyers. General Motors later brought in Toyota as a partner at the plant, but the partnership dissolved and the factory was sold to Tesla.


Although United Auto Workers has embarked on a thus-far unsuccessful attempt to unionize workers at Tesla, no one has publicly accused the union of sabotage.

Musk’s reference to Grove and use of the term “paranoid” struck some management experts as off-key.

“What Andy Grove meant by paranoid is missing the next strategic inflection point in business,” said Ratmir Timashev, co-founder of data management company Veeam and a longtime Grove fan.

“What Grove was focused on was fighting complacency,” said Barry Nalebuff, a professor at the Yale School of Management. “He was afraid [his employees] would rest on their laurels and not feel as if they were to be taken out by competitors at any moment.”


Fearing that, say, rival Advanced Micro Devices might set a fire in an Intel semiconductor fabrication plant “is certainly not the Grove sense of paranoia,” he said.

Bloomberg contributed to this report.

RELATED: Tesla builds another production line to make Model 3 cars more quickly »

russ.mitchell@latimes.com


Twitter: @russ1mitchell

UPDATES:

1:50 p.m.: This article was updated with Los Angeles Times staff reporting.

This article was originally published at 5:55 a.m.