Eberhard has suddenly dropped his suit, the San Jose Business Journal reports. It seems safe to assume some sort of settlement was reached; the $465 million in federal funds Tesla received from the Department of Energy after Eberhard filed could have freed up other cash for a payout, or convinced Eberhard that Tesla had the resources to mount a protracted fight. Or maybe Tesla was simply scared: it just lost a preliminary motion to throw out the case.

Tesla's money also helped it secure land in the Stanford Research Park, not far from Facebook's new headquarters, replacing a San Jose parcel it had planned to acquire but lost in January thanks to its lack of capital.

Now the company can turn its attention to the real challenge: Fighting off Nissan, which just rolled out its "Leaf" electric car, which it plans to introduce in 2012. Nissan, which will lease the battery pack separately, has said its car will compete with gas-powered vehicles costing $25,000-$30,000. Tesla CEO Elon Musk, meanwhile, has staked his company's future on the Model S, which is a full-sized sedan to the compact Leaf but starting around $50,000. In addition to an apparent price gap, Tesla must also wrestle with the recent departure of its science director, in charge of the critical battery system. And it must site and build a factory to manufacture the S itself.

Like most startups, Tesla has been through its share of booms and busts. Right now it's on a roll; the question is whether it can build up enough momentum for the inevitable crash back to reality.

[lawsuit news via Business Insider]

Facebook's policies on usernames state that "Facebook username should have a clear connection to one's identity." But it's not been entirely clear how that would be enforced. Now we have an example; one user wrote in to tell us Facebook has revoked his "BMWUSA" username, which he claims he picked because he loves the German automaker's luxury cars.

"Now,] I am forced to pick a username that is left over after millions have already picked their names."

Well, sure, but our sympathy is limited: BMWUSA sounds an awful lot like a username intended for sale; we wonder if our tipster didn't hold out hope for a payday when the care company decided it wanted to get ahold of "facebook.com/bmwusa". When Facebook opened the doors to new usernames, it prompted a land-grab not unlike the early rush for dot-com domains. BMWUSA marks an early showdown in this new namespace between corporations and purported domain squatters.

Even if the username was selected in earnest, Facebook's response was predictable. Facebook is not an open system, like the internet; it's a privately held, often censorious social network.

Other apparent Facesquatters, beware: In its notice below, shown to our tipster, Facebook writes, "If you see other people with usernames hat do not accurately represent their real names, it is only because they have not yet been removed for misuse." We've called and emailed the Facebook press team to ask if a crackdown is imminent and are waiting to hear back.

(Top pic by wolfwhite99 on Flickr)

Morgenstern runs Valor Equity Partners, which led a $40 million investment in Tesla in February 2008 and controls a seat on the board. The badly mismanaged electric-car startup quickly blew through Valor's money; by October, it was down to $9 million in cash. Despite raising more money from investors, Tesla is running on fumes, and collecting deposits for its Model S electric sedan, a car which exists only as a barely drivable quasi-prototype. Tesla requires hundreds of millions of dollars more than it has to make the Model S a reality — which is why Morgenstern's talk of new money is so interesting.

Morgenstern is briefly visible in the video, apparently recorded by an unknown Tesla fan who hopped in with Morgenstern when offered a test drive, and his face matches another published photo. A Mexican restaurant in Highland Park, a suburb north of Chicago, briefly appears in the shot. According to public records, Morgenstern's family foundation is based in Highland Park. The car is one of Tesla's Founders Series, the first built, and Morgenstern has been reported as one of the buyers in that series. He did not return a message left for him at Valor.

As he pulls away from the restaurant, Morgenstern takes a call and mentions that he's driving around Highwood, a nearby suburban district. During the ride, Morgenstern took a call and discussed Tesla's finances, including rumors previously reported in Valleywag that Tesla was about to take money from a strategic investor. Morgenstern expressed confidence that the deal would be announced Monday or Tuesday. Other sources Valleywag spoke to are less sanguine. Tesla CEO Elon Musk is loathe to surrender control of the company to someone — and yet a new investor would be understandably reluctant to invest if Musk's replacement as CEO weren't a condition of the deal.

So here's the question: Is the video a genuine scoop — or a hoax staged by Tesla?

It does seem curious that Morgenstern's phone just happened to ring seconds after he starts cruising down the street. But if it's a hoax, it's a very foolish one. For one thing, investors don't like their deals getting leaked before the ink is dry. A leak like this, if intentional, may well scuttle the deal, or weaken Tesla's negotiating stance.

And then there's this: Morgenstern uttered something particularly damning on the phone. He said the investment will "make people believers that the sedan will be produced."

Not, mind you, actually allow Tesla to produce its new Model S. It will merely make people believe that it will. That could be read as encouraging optimism among potential buyers. Or it could be read as an intent to deceive people into handing over deposit money for a car that Tesla currently cannot build. Would he really have said that if he knew he was being taped?

It's not that Musk's dreams — introducing a mass-market electric car, colonizing space — are ignoble. Far from it. It's just that he lacks the means and the mindset to realize them.

Every dreamer must turn huckster at some point, lest his fantasies remain just that. But Musk is taking the practice to an extreme.

He is touring the United States, showing off a barely driveable show-car version of his Model S electric sedan, hoping to drum up deposits — sorry, "reservation fees" — on which his cash-strapped company will live until, in theory, it lands $350 million in government loans to build the car — maybe in 2011 but more likely in 2012, years after Musk first predicted his company would sell a mass-market sedan. If it happens at all. Musk has been treating the loans as a sure thing for months, but the company's application has yet to be approved.

If he cannot stop human motorists from polluting the planet, he will try to help them escape it through his other company, Space Exploration Technologies, or SpaceX. But SpaceX, too, seems to be running aground. The latest launch of his Falcon 1 rocket was cancelled, and the vehicle is rotting in the moist salt air of Omelek Island in Kwajalein while his technicians scramble to fix a vibration problem.

Aside from Falcon 1, Musk has no tested vehicles. The Falcon 9, the rocketship which Musk hopes will replace the Space Shuttle in carrying crew to the International Space Station, has not yet had its maiden flgiht. According to an archived SpaceX launch schedule, that was supposed to happen last year. An updated schedule shows that SpaceX's paying clients from Malaysia to Sweden have had their launches delayed, in some cases by years.

Musk's personal life is another source of unmanaged distraction. He is in the midst of a divorce from his wife, Justine Musk; the couple has five children. He is engaged to a British actress, the recently blonde Talulah Riley, whom he is supposed to marry this year. (That launch's schedule, too, has seemed to shift.)

Musk's underlings report a fickle, reality-resistant boss, flitting from idea to idea but never quite landing. And yet we're supposed to believe that Musk will get us to Mars by 2020 on the dot?

There's the real danger: Not that Musk's dreams are wrong, but that his personal failings mean it's more than likely he'll never realize them. Then the danger is that Musk's frothingly dizzy fanboys and orgasmically giggling fangirls will turn not just against Musk but against the dreams of electric cars and spaceflight. That's why, if you hope to zip around this rock without polluting it, or escape its gravity altogether, Elon Musk should not be your hero. The dream is not the dreamer.

(Photo via SpaceX)

Mostly Letterman wanted to know why Detroit's big car companies didn't come up with mass-market electric cars, and whether Tesla's Roadster really would save the planet. (He made a good point about carbon emissions from coal-fired electrical plants.)

But Letterman, when he let Musk get a word in edgewise, let him off easy. He didn't quiz Musk, for example, on whether the Model S show car Musk drove on set was the real thing. According to Dan Neil at the Los Angeles Times, it's not. The slapped-together prototype, a rebuilt Mercedes with a Tesla-designed powertrain, is "just barely ambulatory — more like a glorified golf cart than a harbinger of tomorrow tech," Neil wrote. And Tesla executives confessed to Neil that the car was far from being finished in its design, let alone production.

Here's another thing Letterman should have asked about: How is Musk going to build the Model S? Even if Tesla gets the $350 million in government loans it's hoping for — far from a sure thing — it will fall hundreds of millions of dollars short of the real cost of bringing the Model S to market. An insider tells us Tesla is about to close a new round of financing from a so-called "strategic" investor — that is, some industry powerhouse, rather than a traditional financier. Tesla almost ran out of money last fall, and has run on fumes since then, despite raising a $40 million round of convertible debt from existing investors.

Any new money will mean handing a large stake to the new investor. Daimler, which already has a deal to buy parts from Tesla for its own electric car, is a strong possibility. But will they leave a hothead like Musk, with his habit of stretching the truth, in charge? That's what Letterman should have asked — not if electric cars will come to market, but if Musk will be the man to do it.

More from the segment:

Lacy conducted an interview with Musk that appeared last Friday. But instead of probing Tesla's uncertain future, she invited Musk to talk about the past. The column that sparked his outrage, published last November, asked whether taxpayers should subsidize a company which makes $109,000 electric sports cars for the wealthy. Musk claimed that the Times had retracted the story. In fact, the newspaper had corrected a minor bit about Tesla's application — still not granted yet — for $350 million in government loans. Randall Stross, a San Jose State University professor and Times contributor, initially wrote that the loans would go to the production of Tesla's expensive Roadster, as opposed to funding its vaporous plans for a $57,400 sedan, the Model S.

The New York Observer has the he-said, she-said between Times Sunday Business editor Tim O'Brien and Lacy, a former BusinessWeek reporter who freelances for TechCrunch, Yahoo, and other publications. Here's O'Brien:

I think Sarah Lacy was too busy giggling to do Journalism 101 and call Randy or me for comment to make sure what Elon was saying was accurate. Because it was not only inaccurate, it was flat-out wrong. We wrote a clarification of the headline. We didn't retract the story at all; we stood firmly by the story, and I still stand by Randy's column. You can't help but watch that interview and marvel at the squishy familiarity between Lacy and Musk. And I wonder whether or not some journalistic blinders had popped off.... It was so ridiculous that it was entertaining. It was so misguided and inaccurate and I was stunned at the poor quality of the journalism.

Lacy's response:

I think it's embarrassing that The Times would try to throw me under the bus because they did shoddy reporting that they wound up correcting. If they want to throw me under the bus to make up for their own column that they massively rewrote, you know, go for it.

Actually, that was an error, too. As the Observer notes, the Times removed one sentence from the story and rewrote another.

In her defense, Lacy implied that the Times was sexist for criticizing her. But then she goes on to defend herself on the grounds that she's a girl:

I think everyone has their own style in journalism. Look, I'm a girl from the South! Sometimes I laugh. Someone can pejoratively call it giggling. But if you look at the body of my work, I ask lots of hard questions, and break a lot of hard news.

Another error. If you look at the body of Lacy's work, you'll see a pattern of oblique references to unspecified insider knowledge trotted out after someone else breaks a story. Lacy knows far more than she reports, she always implies — and yet this knowledge never seems to make its way out to the public in a way that benefits the reader.

Lacy is right that the Times is making a lame critique of her journalism. Here's what the Times should have said.

First of all, it ought never have corrected the story. Because the truth of the matter is that if Tesla persuades the government to give it loans, it will in fact spend at least some of that money on ongoing production of the Roadster. It plans to open several expensive new showrooms in the U.S. and Europe. Until late 2011 at the earliest, those showrooms will have nothing but the Roadster to sell. If the Roadster is profitable now, it is barely so. Tesla's overhead will almost certainly have to be funded through the loan proceeds.

A tipster, who's given us inside info on Tesla before, has sketched the back-of-the-envelope numbers for what it will cost to get the Model S sedan into production and thinks, even with the loans, Tesla's more than $500 million short of what it needs. The Model S "prototype" Musk showed off last month was a "show car": a one-off model of what a car will look like, but far from a finished design that can be sent into production. The tipster thinks the earliest Tesla can go from concept to delivery is 2013 — not 2011, as Musk promises, which means another two years of peddling high-end sports cars for the wealthy, as some "douchebag" dared to point out.

Here's the tip:

The untrained observer and the Government may be persuaded by typical industry show car building tricks, but insiders and auto experts know that the Model S that was revealed was a reworked Mercedes CLS. To top it off the components and parts on the vehicle are not even those ever considered in the design.

The fact is Tesla had an agreement with an OEM [original equipment manufacturer] to use their off the shelf parts in the model S. Unfortunately that agreement expires in 2010, a good three years before Tesla can get the Model S engineered (assuming they get federal money). No other OEM has been willing to give Tesla the rights to buy parts or component CAD to design to, hence Tesla would need some additional $300M to develop all of the necessary hardware (suspension, air bags and sensors, modules etc.)

Cost:

D&R the Model S $250M
Build the Factory $300M
Components to put in the car $300M
Retail outlets $50M

Asking Musk about that would have made for a fascinating interview, though Musk probably would have lobbed his insults at Lacy rather than Stross. When we asked Musk about whether he was going to personally guarantee the deposits his company's collecting on those Model S sedans, this is what he said:

I'm not going to answer your questions until you start caring more about creating a truthful picture of Tesla. I know you think you are doing good by offsetting what you see as positive spin with negative spin, but that doesn't count as being honest.

That's the moral universe of Elon Musk: Only positive spin counts as "truthful." Lacy seems very comfortable in that world.

Musk, the boss of and lead investor in the electric-car startup, was previously the cofounder of PayPal, a payments startup bought by eBay for $1.5 billion in 2002. So one would assume he's rolling in it. And cash for silence is the usual barter when the newly wealthy part ways with their first wives. But Justine Musk isn't taking that route. After reading a profile of Elon's current love interest, 23-year-old British actress Talulah Riley, who is 13 years her junior, she piped up:

When you are living part of your life in the public eye anyway — when you blog, when your divorce has been kicked out there for public consumption — when does this whole idea of "taking the high road" segue into this idea of being silent, silenced, even as someone appropriates your words to spin out a certain version of events?

Justine now disputes the notion, previously advanced by Elon, that the two were racing to the courthouse to file divorce papers. She says that she and her husband had completed all of three sessions of marital counseling when Elon gave her an "ultimatum":

"Either we fix [the marriage] today, or I will divorce you tomorrow."

The next morning, Justine found that her credit card had been cut off and thereby learned that he had gone ahead and filed for divorce. This is not the picture she painted last year of an amicable, mutual split.

The unraveling of the Musks' marriage appears to have happened in the space of a few short weeks in July. Elon met Talulah Riley, the star of St. Trinian's, in London on July 3. On July 18, Justine wrote about being "in the midst of some major drama." A week later, Riley escorted Elon to the opening of Tesla's auto showroom in Menlo Park. And soon afterwards, he proposed to her, Riley told the Daily Mail. A couple of weeks later, Justine wrote a biting blog entry about older men who date younger women:

I was thinking about the time a male friend, who is my age (mid thirties), and I had a bit of a spat in the driveway outside his lush hillside home. When I refused to buy into his argument and turned to go inside the house, I heard him say scornfully, "Yeah, that's it, go hang with the twenty year olds."

I thought: Dude, I'm not the one who's dating them.

Not that there aren't some mature early twentysomethings out there capable of dating anybody — just that his comment revealed more about men like him than any group of women. To wit: women that young are like children, and quality interaction happens between myself and fellow successful male peers. And yet that pool of "children" is where these same men go again and again to fish out the new girlfriend. Thus: my girlfriend is a child, but that's okay, because quality interaction happens elsewhere.

The next month, Justine went public with news of her divorce. She subsequently wrote:

We had a good run. We married young, took it as far as we could and now it is over. That's about all I can say for now, other than that it was a very sad and very necessary decision.

So why is she breaking her silence now? It could be her frustration with seeing her own words used to portray Elon as an honorable man who found a new love as his old one foundered. But it could also be that she has literally nothing to lose.

Acquaintances have been saying for some time that Elon is essentially broke, save for his illiquid stakes in Tesla Motors and SpaceX, his rocket-ship startup. We hear that he had to liquidate investments at a loss so he could participate in Tesla's most recent round of funding, and that he's couch-surfing with friends on his frequent trips from Los Angeles, where he lives, to Silicon Valley, where Tesla is based.

One hopes Riley and Musk really did bond over a mutual love of astrophysics.

(Photo of Musk and Riley via Daily Mail)

Musk, apparently eager to give the magazine an exclusive and reassure buyers who must put down a sizeable $40,000 deposit for a car that they won't see until 2011 at the earliest, said that GE Capital was an investor:

Q: What can you say to reassure buyers fearing you might go under?

A: Even in the worst case of an Armageddon scenario, I'll personally refund people [their money] if need be. I think there's very little danger of that. We've raised around $40 million, and a bit of news that hasn't come out yet [is] General Electric is investing in Tesla. [GE Capital] will be the second-largest investor in this round, after me. Our business plan that we presented to investors gets us to profitability by the middle of this year, even if some negative stuff happens.

A Car and Driver spokeswoman confirms that the magazine is running a story on Tesla in its May issue.

Musk appears to speaking about Tesla's long-delayed $40 million debt financing round which just closed this month. We asked GE if they had invested in the company. Andy Katell, a spokesman for the GE Energy Financial Services unit said no:

We have not invested in Tesla, although we are closely watching it and several other companies in this area.

In January, speaking at a town-hall-style event for Tesla buyers, Musk had hinted that a major player with a "household name" would soon announce an investment in Tesla. So add this to the list of Musk's statements which later prove inoperative.

Update: Tesla now says GE had promised an investment at the time Musk gave the interview to Car and Driver, but backed out the day it was supposed to wire funds to the company.

In what appear to be leaked excerpts from the May issue of Car & Driver, CEO Elon Musk says that GE Capital participated in a recent round of convertible-debt financing for the troubled company.

Welcome news indeed. Under Musk, Tesla Motors has been running on financial fumes. An engineer troubled by the company's mismanagement leaked word that the company was down to $9 million last October. In response, Musk announced that the company would raise $40 million in debt financing. He also told Tesla buyers that he would personally guarantee their deposits.

Musk has been saying publicly, since November, that the company had raised the money, implying it was a done deal. But tipsters tell us that he actually didn't close the round until two weeks ago. He may well have been delaying the news so he could include word of a deep-pocketed investor like GE in the round.

It's just another sign of Musk's troubling relationship with reality. Every entrepreneur must dream of things that have not yet come to pass. But Musk has a history of presenting futuristic fictions as facts on the ground — like the time he claimed the government had approved his company's $350 million loan application. It hadn't, and his flack was forced to issue a retraction.

Musk is now asking Tesla buyers to pony up $40,000 in deposits for the new Model S, even though he has yet to reveal a site for the factory where he plans to build them or financing for production. It's eerily reminiscent of the career of automotive entrepreneur Preston Tucker.

With Tesla desperately short on cash, and breaking even at best on its sales of its Roadster sports car, Musk is clearly planning to use Model S buyers' deposits as a source of capital. It's a sneaky way of turning them into lenders, without giving them the recourse that, say, GE Capital might have.

And Musk is not being straight with buyers on how safe their deposits are. On Thursday, when he unveiled the Model S in Los Angeles, he stated flatly that buyers could lose their money:

For those who are worried about what will happen to their deposits if the car is never produced, since the money will be spent on development and not held in escrow, Mr. Musk said: "The worst-case scenario is they would lose their money. They are at risk."

That's not what he told Car & Driver readers:

Even in the worst case of an Armageddon scenario, I'll personally refund people [their money] if need be. I think there's very little danger of that. We've raised around $40 million, and a bit of news that hasn't come out yet [is] General Electric is investing in Tesla. [GE Capital] will be the second-largest investor in this round, after me. Our business plan that we presented to investors gets us to profitability by the middle of this year, even if some negative stuff happens.

(A nice bit of misdirection, that — shifting the subject from the company's present losses to the "plan" for profitability.)

So which is it? Are buyers' deposits at risk, or aren't they? Is Musk good for the money, or isn't he?

One reason for Musk's ever-chaning answers may be his shifting fortunes. We hear he's been complaining to friends about being short on cash and having to sell investments at a loss in order to invest in Tesla's recent debt round. He's living in Los Angeles and flying up to the Bay Area to work at Tesla. We're told he's staying with friends — possibly a move to defray the costs of his commute. Add to that an almost certainly expensive divorce from his wife Justine. If buyers are going to rely on Musk's backing for their deposits, they should be asking him to open up his books.

Rose has deleted the pictures after someone at Tesla requested that he take them down. But Tesla flack Rachel Konrad seems thrilled with the leak, praising Jalopnik editor Ray Wert for his site's coverage of the leak. Here's Konrad's email to Wert (who took issue with recent coverage of Konrad's blogger-outreach strategy):

So was the leak a violation of Tesla's intellectual-property rights, or a "really, really nice job"? It's about as clear as anything at the electric-car startup these days.

For Tesla, any publicity is good publicity. The Model S unveiling is Tesla's last-ditch hope at a future in the business. Although it does not have financing for the production of the Model S, or even a site for a factory to produce it, Tesla plans to take deposits for the $58,000 vehicle from customers, a move at least one Tesla executive deemed fraudulent, prompting his departure.

We asked Tesla CEO Elon Musk who sent Rose the takedown request and he replied, "I think it was your mom." And then added, "By the way, I have a crow sandwich coming your way soon." Good to know that this standard-bearer of the green revolution isn't working himself to death to launch his new vehicle and still has time to toss playground insults at bloggers.

Like Detroit, cash-strapped Tesla is currently a supplicant to the government, counting on money earmarked for alternative energy to carry it through its trying times. In other words, a good time to have a political celebrity in their corner, right? Alas, no.

Schwarzenegger frequently cited Tesla as an example of California's nascent green industries in speeches in previous years, and appeared with Tesla CEO Elon Musk at various events. But he's been quiet on the subject lately. With good reason. Two sources close to the company say Schwarzenegger aides have been talking to Tesla since at least the fall about returning the Governator's Roadster. Given the company's financial troubles, Tesla executives asked them to hold off, fearing bad publicity.

Tesla, the troubled Silicon Valley electric-car startup, has been struggling to come up with financing for production of its planned Model S sedan, a prototype of which will be unveiled tomorrow in Los Angeles. The company nearly ran out of cash last fall, and cancelled plans for a car factory in San Jose. It is currently pinning its hopes on winning loans from the Department of Energy, but that is far from a sure thing — and the loans themselves, in a bit of a catch-22, are granted based on the recipient's financial viability.

So why doesn't Schwarzenegger like the Roadster? Built on a Lotus Elise body, the car is not easy to get in and out of, especially for someone with the former bodybuilder's robust frame. "He's more of a Hummer guy," one tipster tells us.

(Photo by Justin Sullivan/Getty Images)

Tesla Motors is an icon of the new Silicon Valley, which is placing its bets on clean, green technology. Its $109,000 Tesla Roadster runs wholly on electricity and accelerates from 0 to 60 miles per hour in less than four seconds. But the company is in deep financial trouble, and is betting its future on government loans that may not materialize. Musk, the company's lead investor, took over as CEO last fall. But his reign has been marked by constant and, as Musk himself had admitted, deadly accurate disclosures of Tesla's parlous condition.

A tipster writes:

Life for the employees at Tesla Motors has got more depressing over the last few months. Elon Musk is now spying on everyone.

The inquisition began after an engineer named Peng Zhou revealed the company's perilously low $9 million cash balance to Valleywag last October. Musk ordered a heavy-handed investigation. He hired an outside IT contractor go through the company's email and instant messages, and then had an investigator take fingerprints off a printout discarded near a copier used to leak the email. The investigation implicated Zhou. Musk ordered Zhou to confess and apologize to the entire company, and then fired him.

In his latest witch hunt, which our tipster says took place recently, Musk set out to entrap potential leakers by sending each employee a slightly altered version of an email which he expected would get sent to the media. Musk began the memo, "I'm a big believer in trusting employees."

By altering phrases scattered throughout the email — changing "I'm" to "I am," for example — a Tesla IT employee created individualized memos which would have a detectable "fingerprint" in the text. In the memo, Musk asked everyone to sign a new, stricter nondisclosure agreement. The agreement wasn't the point of the email — it was just a ruse to catch the company's leakers.

Musk did not even let his executives in on the plan. That's where the scheme went hilariously wrong.

Hapless general counsel Craig Harding, who's overseen several legal setbacks for the company, forwarded his own personalized copy along with the agreement. As a result, everyone at Tesla had a copy of Harding's version to compare to their own, making Musk's scheme plain to see — and giving them a version that was safe to leak.

"What was surprising was that Elon failed to mention the entrapment to his executive team," says our tipster. "When they learned of the scheme, unhappiness ensued. Isn't trust a great thing?"

Can you guess what happened next? That's right — the memo made its way to Valleywag. We don't make a habit of disclosing our sources, but it's safe to say this leak came courtesy of Tesla's top lawyer. Thanks, Craig!

Here's Musk's memo — one version of it, anyway:

I'm a big believer in trusting employees and sharing information widely within the company, rather than confining it to a narrow set of senior execs and giving everyone else the mushroom treatment. Providing people with an understanding of what problems need to be overcome helps them align and prioritize their actions in pursuit of the greater good. It also ensures that all employees feel included and part of the same team.

This is why I'm so concerned about the continuing leaks to media. It really hurts free communication when even minor issues are leaked and blown way out of proportion. It is nutty that a company like Tesla, which is doing really well right now (how many companies can say that they're sold out through October?) should suffer from misleading articles on blog sites that would have no credibility, but for a purported inside leak. The leaks often aren't even accurate!

This kills trust and creates a negative atmosphere within Tesla. It has to stop.

Today, the legal department will circulate a declaration form to all employees and contractors within the Bay Area. People will be asked to provide their word of honor and signature that they haven't knowingly leaked any Tesla confidential information to the media. They'll be reminded in clearly written language of the substantial liability they would incur for disclosure of confidential information in willful violation of the confidentiality agreement they signed with Tesla. If someone does not tell the full truth here, please take my word that you will be prosecuted to the fullest extent of the law.

Alternatively, people will be given the option of listing every leak they have made, whether published or not. If you fully disclose any leak you have done, the consequences will be precisely nothing. You will be completely forgiven and, unlike Peng, won't be asked to publicly apologize to the company.

The actions of any one person can't be allowed to hurt the vast majority of people at Tesla who are working incredibly hard to make a difference in the world.

Elon

For the record: Tesla is not "doing really well right now." It is losing money on every car it sells, and plans to take deposits from customers for cars which it has no means to build. But this would not be the first time that Musk has invented fictions about the condition of his company.

Huang is auctioning off the rights to a tell-all book between now and May 30, 2009. Musk and Huang dated in 2003, according to Huang's website, Roomsofhorror.com. At that time, Musk was still married to his wife Justine, whom he is divorcing.

Huang also claims to have dated John Tu, the CEO of memory-chip maker Kingston Technology. Here's Huang's bio:

Actress, model, writer, and film producer Lily wrote two books about her true horrifying experiences while she was dating Elon Musk -founder of Paypal, and John Tu - President of Kingston technology, at her old, gloomy, dark, cold and eerily quiet apartment. She believes it was haunted. In her books, she wrote how inexplicable forces of nature arose in their glamorous and loving relationships. Read how supernatural powers can and do affect our daily lives and love. If you want to discover and experience what happened in her relationships and the frightening events in her apartment, please read these scary books… if you dare!

Currently, she is producing a horror movie entitled "Rooms Of Horror".

And here's her brief summary of her relationship with Musk:

Lily dated with Elon Musk in 2003. Lily experienced much more horrifying events while she was dating Elon at her old, gloomy, dark and eerily quiet apartment. She has just finished this book, entitled "ASIAN BEAUTY-HOUSE OF HORROR". It is another scary book. It is available to buy at auction. Minimum bid is $ 3 Million US dollars, of course, the highest bidder will acquire all the rights to this book.

This is, as far as we can determine, not a complete hoax. Huang actually exists, according to the woman she hired to create the website. The domain was registered on February 19. Metadata in the site's pages say it was created by superbatcat.com, the website of Southern California Web designer Kieu Le. According to Le, Huang hired her via a Craigslist ad and met her in person. Le says the person she met resembles the photographs of "Asian Beauty Lily" that Huang provided for the Roomsofhorror.com website.

So what's going on here? Here are some theories:

• Huang actually did carry on relationships with Musk (left, top) and Tu (left, bottom), and is hoping her ex-lovers will buy her silence by paying for "rights" to her "books" and "movie."
• Perhaps she really is writing fascinating tales of the paranormal and technological.
• Or she's just crazy and made the whole thing up.

Here's Huang's Rooms of Horror trailer:

Lily has another video on YouTube en deshabille.

Last December, we'd heard his departure might have something to do with wrongful-termination lawsuits Tesla was facing. (Our sources had told us the employee lawsuits been settled at considerable expense; in fact, they're still pending. And Siry, who was subpoenaed in a case, ended up not being asked to testify.)

What actually prompted his departure: Siry learned last fall that CEO Elon Musk planned to collect deposits from customers for Tesla's Model S Sedan, a car that exists only in prototype.

Why would that drive Siry to quit? Tesla has no factory to build the car, and no financing for it. Musk recently said that Tesla had gotten $350 million in loans from the government; in fact, it hadn't, a reality even Musk's own flack had to acknowledge. Taking deposits from customers under those circumstances in the hopes that everything will come together amounts to a fraud, Siry believed, and he wanted no part of it.

Valleywag first reported Musk's plans to take deposits from customers for the Model S. And sure enough, he's going ahead with them — taking $40,000 deposits starting next month, for a car he may never be able to deliver.

In an email to customers, Musk announced that Tesla Motors, once seen as the brightest hope of the electric-car industry, was set to receive $350 million from a Department of Energy loan program in a matter of months:

Regarding funding, I am excited to report that the Department of Energy informed Tesla last week that they expect to disburse funds from our $350M Model S loan application within four to five months. The Obama administration has thankfully made it a top priority to move quickly on the Advanced Technology Vehicles Manufacturing loan program, as this will both generate high quality jobs in the near term and lay the groundwork for a better environment in the future.

A Tesla flack forwarded the email to journalists, and then had to send out a hasty correction:

The newsletter contains an on-the-record statement from Elon about the expectations of the Department of Energy loans, but it's important to note that we have NOT received final confirmation from the DOE that we will receive funds. None of the 75 applications have received final approval. However, we are in the later stages of the loan application process, where the DOE is evaluating Tesla's financial viability and technical merits. The DOE is doing its due diligence, and we are very optimistic about a relatively expedient timeline for disbursal of funds.

Here's Tesla's catch-22: The government will only loan Tesla money if bureaucrats deem it financially viable. And it will only be financially viable if it gets the loan.

In the mind of an entrepreneur like Musk, this is a mere detail. The money is as good as his, and the only hangup is getting everyone to share his vision.

In fact, Tesla is far from profitable. Tesla has already raised prices on existing orders for the company's $109,000 all-electric Tesla Roadster, an admittedly nifty car which accelerates from 0 to 60 miles per hour in four seconds or less. Musk justified the move by claiming the company wasn't making a profit on current orders.

And yet, in the subject line of the email, he claimed "Tesla to be Profitable by Mid Year," and wrote:

The $40M financing round completed in December was twice the amount Tesla needed to reach profitability. Moving forward two months later, we remain on track with our cost reductions and production ramp, so it appears highly likely that Tesla will meet the goal promised to those investors of becoming profitable by mid year.

Valleywag reported in October that Tesla was down to $9 million in cash. Tesla insiders tell us that it has not, in fact, completed the $40 million in debt financing it promised to raise in November. Musk recently told customers at a town-hall meeting that the company almost ran out of cash again in December because of delays in running the money.

And a back-of-the-envelope estimate shows that Tesla is far from profitability. The company has 300 employees; estimate $120,000 per employee, including benefits, and you get $36 million in annual staff costs alone. Tesla is currently producing cars at a rate of 1,000 a year, meaning that it must make $36,000 per vehicle just to meet payroll expenses. It is nowhere close to making that much money on the Roadster, if it is making money at all. And that's not counting the cost of Tesla's fancy new showrooms; it has leased space for stores in Chicago and London, and has plans for four more.

The only way Tesla might now generate cash is by taking deposits for its Model S sedan, a mass-market car it hopes to produce in far greater volumes than the Roadster. It plans to unveil a drivable prototype next month. But it has nowhere to build the car, having cancelled plans for a factory in San Jose. And unless Tesla's government loans come through, it has no source of funding.

The only real source of financial viability Tesla now has is the power of Elon Musk's imagination. It should not be discounted: A recent GQ feature detailed how he dreamed as a 10-year-old in South Africa of traveling to space, and he now has his own space-rocket company, SpaceX.

If he can persuade government officials to back him, despite Tesla's dreadful figures, he might have a shot. If he can persuade customers to put down money for a car he currently has no means of delivering, he might have a shot. One can't fault Musk for dreaming. That's every entrepreneur's job. But his habit of talking about dreams as if they were reality could be what ultimately dooms his vision.

(Photo via Treehugger)

Tesla's lead investor, Elon Musk, installed himself as CEO last fall. That's just one of the many parallels between his story and that of Preston Tucker, the doomed automotive entrepreneur whose dream of an innovative new car died amid charges that he was taking people's money for cars he couldn't build. Musk's Tesla Roadster, a $109,000 sportscar which races from 0 to 60 miles per hour in less than 4 seconds, could be the next Tucker Torpedo.

In October, Valleywag reported that Tesla Motors was down to $9 million in the bank. Musk confirmed the company's cash position, and promised he would raise another $40 million in convertible debt from existing investors. But the fundraising is taking longer than planned. At a recent town hall meeting with customers, Musk reportedly told Tesla buyers that the company almost ran out of money in December, before it raised part of the round. Tesla is still seeking new funds.

And it has turned to existing customers as a source of those funds. The company is losing money on every Roadster sold, Musk says. Having already spent their deposits, Musk ordered a price hike on the $90,000-plus car's options, adding charges for everything from delivery to the car's electric charger to its sound system. (It is rather like Tucker's move to sell accessories to car buyers before he had even built one.)

Musk claimed he needed to raise prices to assure the company's viability. If the company does not look like it will make money soon, it will not be eligible for some $400 million in Department of Energy-guaranteed loans on which Musk has been counting to start production of a mainstream $50,000 sedan, the Model S, which has already been delayed until 2012.

But according to a Tesla tipster, Musk's decision to raise prices has caused severe damage to the company's operations. Production ceased while manufacturing waited to hear what options to install. And the company's salespeople were consumed by the task of calling back customers and asking for more money, rather than pursuing new sales. While cars stopped going out, money stopped going in. He also faces a real risk of customers asking for their deposits back; California's vehicle code provides strict consumer protections against such fiddling with prices. Tesla buyers, though, tend to be wealthy true believers, so they may well pony up more money — if they can still afford the car at all, that is.

Now Tesla has cancelled plans to build a factory in San Jose where it planned to build its Model S, a mass-market sedan. Musk is still planning to take deposits from Model S customers starting March 5.

This sounds exactly like the sort of trouble Tucker (left) found himself in, with an engineer accusing him of never bothering to buy production machinery for a factory he'd never bothered to build, while taking money from investors and customers.

Tesla and Musk may somehow pull through this. But he has already told customers they may lose any money they've given him. In November, he offered to personally guarantee the deposits of any Roadster buyer should the company fail. But at this week's town hall meeting, he told customers their deposit money would be at risk if they did not go along with his price hike and Tesla went bankrupt.

Musk, a successful Web entrepreneur whose PayPal sold to eBay for $1.5 billion, is also in the business of building rocket ships through his other company, SpaceX. He's talked about carrying out a privately funded mission to Mars. At this point, that looks more likely than Tesla getting off the ground.

Musk recently sent this email to employees:

Just a quick note to emphasize the importance of quality in the Roadsters that are being delivered to customers. This takes precedence over future developments.

Happy holidays,
Elon

What's Musk referring to? Surely it's the firestorm of criticism Tesla has faced after its $109,000 Roadster, a battery-powered vehicle whose all-electric motor makes for a thrilling ride, apparently ran out of juice on camera during a test drive by Top Gear, a well-known British automotive TV show.

A Top Gear spokeswoman later admitted the scene where the Tesla was pushed into the garage was staged, and it wasn't actually out of power. But the Top Gear show did highlight problems with the car, like brakes which unexpectedly died. Could that be what prompted Musk's holiday missive?

The notion that Tesla needs to fix its current line of high-end sports cars, rather than work on "future developments," is harrowing for a company which nearly ran out of money earlier this year and is seeking a $400 million loan from the government. Tesla's main "future development" is a mass-market sedan, on which the whole premise of the company is based; the Roadster is a showy way to enter the market, not the company's real mission, Musk has said. But if Tesla engineers can't make the Roadster work, why should taxpayers loan it money for a second car that even its CEO says isn't a priority?

Silicon Valley has a bit of an honesty fetish. But there's such a thing as being too honest, and that may have been Siry's flaw. Siry's a voluble sort; he blogs about cars and marketing. As a corporate flack, he's relatively forthright — which is fine when, say, arguing the technical merits of Tesla's $109,000 Roadster sports car, the preferred ride of geeks from Google founders Larry Page and Sergey Brin to Mahalo CEO Jason Calacanis. But when it comes to talking about personnel matters, that bluntness may be what cost him his job — and Tesla millions of dollars.

Siry writes in his blog that he quit over "disagreements in strategy." But here's what two Tesla insiders claim: After Siry made comments in the press about the reasons why the company laid off or fired certain employees, some of them threatened to sue. It's not clear what, exactly, Siry said that was so incendiary, though back in January, he told a tech blog that some laid-off workers were "not the best on the team" — the kind of evaluation that could jeopardize a job search. Tesla, we're told, settled the lawsuits for $2 million — and told Siry it was time to motor on.

Update: Siry says he had no knowledge of any settlements and that he left for unrelated reasons. So why are two unrelated sources saying he did? Curiouser and curiouser.

Update: We've learned the real reason Siry left.

Eberhard and Musk have long feuded, even before Musk ousted Eberhard as Tesla's CEO. But I'd note that for once, they're not outright contradicting each other here.

It's far more common for Musk to have a version of events that conflicts with everyone else's accounting. His history of events at PayPal, the electronic-payments startup he cofounded, seems to be shared only by him. And Musk has been telling everyone who will listen that SpaceX, his rocket startup, has a "Nasa contract to build the Space Shuttle replacement after 2010." If you ask Nasa administrators, they'll say that's more than a stretch of the truth. (In fact, SpaceX is competing for a contract, but it has only hit some of the milestones; Nasa is currently planning to rent out space on Russian rockets to supply the International Space Station, and a future supply contract for SpaceX is a possibility, not a certainty.)

So Musk has a tenuous relationship with reality. Is this a handicap in his business? Apple CEO Steve Jobs is famous for his "reality distortion field" — a charisma that leads others to believe the most exaggerated claims, because the vision behind them is so compelling.

Of course, Jobs actually has brought his outlandish vision to life four times: With the Apple II, the Mac, the iPod, and the iPhone. Musk has realized the Roadster, and SpaceX has managed, after several crashes, to launch one lone rocket. He's also got SolarCity, a startup which installs solar panels on roofs.

If in 2011, we live in a shiny future where we drive Tesla cars powered with clean electricity from SolarCity panels, and SpaceX's Falcon1 rockets are supplying orbital space stations, then we will be living in a reality of Musk's making — much as Jobs envisioned the iPod in the dark days of October 2001, and then, three years later, saw them everywhere on the New York subway.

There's another possibility, however, which would also make Musk like Steve Jobs — the Jobs of two decades ago, who was forced out of Apple by the CEO he hired. Tesla could go under, SpaceX could fail to win the Nasa contract, and SolarCity could get beaten down by rival cleantech startups. And then Musk, driving his Roadster on the lonely roads of Silicon Valley, would find himself facing a reality not constructed in his mind. An unpleasant thought, that. Far easier just to succeed.

Kind of boring. If you like amusement-park rides, you'll love the Tesla Roadster. If, like me, you sit there calculating the infinetesimal odds that the operator's insurers will allow a rollercoaster to actually pose any real danger to you, you'll hate it. I spent the ride up to Coit Tower and back thinking about how much coal was burned to generate the electricity now being thrummed away by the Roadster's motors.

Back at the bar, Musk was affable enough, considering I've hinted he's taking out his midlife crisis on his employees and may be scheming to take over Tesla Motors completely by running it into bankruptcy. He laughed at the last idea, and then thanked me for the suggestion, saying he hadn't thought of that particular financial maneuver.

Musk still blames cofounder Martin Eberhard for Tesla's current straits. When Tesla raised its fourth round of funding in 2007, Musk says, Eberhard, then CEO, told investors that the Roadster's cost was $65,000, giving it a $25,000 gross margin. "It's right there on the slide, with Martin's name on it!" Musk told me. The company, he adds, was already in the middle of a search for a CEO to replace Eberhard.

A private-equity firm which had invested in Tesla sent some consultants to help Tesla sort out supply-chain issues, and they found that the Roadster's parts actually cost the company $140,000. "We might as well have sent customers $50,000 and saved the bother of making the car," said Musk. Former Flextronics CEO Michael Marks, a Tesla investor, confirmed their findings — and that's when Musk decided to fire Eberhard and replace him temporarily with Marks. Just as now, the company's cash position was running low, and Tesla tapped existing investors for new funding, despite having just raised a round. He revealed none of this at the time, he says, because it would have jeopardized the company's ongoing CEO search. (Not that that worked out particularly well; Musk installed Ze'ev Drori, then replaced him last month.)

That's Musk's version, anyway. I'm skeptical, if only from experience with Musk; when he was running PayPal, I remember him making statements that company insiders told me didn't match the facts. But as he was leaving to drive back to the Valley, Musk mentioned that his divorce from his sci-fi novelist wife Justine was a mutual matter; he got the paperwork in first, but she was getting ready to file papers, too. That, at least, checks out. I'm still not sure if I should trust Musk's account of what led Tesla to these perilous straits. But I do believe now that he's brave enough to drive a Roadster up to San Francisco and deliver it in person.