Tesla's bid to keep Fremont factory open revealed in emails, memos

After Tesla's Fremont auto factory was hit with an Alameda County shelter-in-place order related to COVID-19, senior company leaders made a last-ditch legal argument to that city's police force.

The company's 10,000-person Silicon Valley plant was covered by federal and state guidance on "critical infrastructure," the Tesla executives said, and therefore shouldn't have to abide by a local order similar to those that have forced many other companies to either lay off employees or have them work from home.

But that argument doesn't appear to have gone very far with Fremont Police Chief Kimberly Petersen, as shown in emails and memos released by the city to Protocol in response to a public records request. She said the county rules would not be superseded.

On March 18, two days after six Bay Area counties issued strict "shelter-in-place orders," interim Alameda County Health Officer Dr. Erica Pan informed local officials that she "does not consider Tesla to be an essential business, but rather, considers Tesla's manufacturing plant in Fremont to be a public health risk."

The next morning, five senior Tesla executives, led by a senior policy adviser, Dan Chia, joined a virtual meeting with Petersen, one of her captains and the deputy city manager of Fremont, Christina Briggs.

The two sides negotiated details of how Tesla would comply with the local order, emailed notes show, with city officials allowing the company to continue back-office functions such as processing payroll and employee benefits. Tesla was also allowed to keep open its popular charging stations for owners.

More important to Tesla's bottom line: "… all vehicle manufacturing would cease by the morning of March 23," Petersen wrote, adding that Tesla's Chia "explicitly agreed to that understanding. If you were to transition to manufacturing ventilators, or other equipment intended to aid in the fight against COVID-19, these activities would be permitted."

Later on March 19, California Gov. Gavin Newsom issued the statewide shelter-in-place order, prompting Petersen to make clear to Tesla that the order's FAQ section included the following: "This is a statewide order. Depending on the conditions in their area, local officials may enforce stricter public health orders. But they may not loosen the state's order."

Tesla's position that its manufacturing, which is under constant pressure from investors and CEO Elon Musk, should have been exempt from the government's efforts to curb the spread of COVID-19 stands in contrast to the rest of Silicon Valley.

Most other tech companies sent full-time employees to work from home the week prior. Some contractors and hourly workers like security guards remained the week of the shelter in place, but two contractors at Google told Protocol that they were sent home and promised pay the day of the county shutdown.

Tesla told workers in an email provided to Protocol that they were free to take time off if they worried about their health, but the company did not offer additional sick leave.

In a March 17 visit to Tesla's Fremont factory for the daily afternoon shift change, Protocol found the factory buzzing with activity — food trucks dotted packed parking lots, 18-wheelers departed with full loads of Model 3s — while much of the surrounding area hunkered down in response to county health orders.

Several Tesla workers who talked to Protocol on condition of anonymity to protect their jobs worried about getting sick due to few visible precautions. "All lines are running just as normal," said one Fremont manufacturing worker who builds seats for Tesla's electric cars. "Almost no one wearing masks, no actual distancing."

Carl Bergstrom, an infectious disease biologist at the University of Washington, noted that Musk had publicly scoffed at the concern about COVID-19. Bergstrom called Tesla's delay in closing its factory "irresponsible," saying that "when you bring that many people together, it's very hard to prevent transmission from occurring."

According to the records released by Fremont, Tesla's displeasure with the order to halt production came to a head during a call between the company's Chia and the police chief the morning of March 22. During the call, Petersen explained she was "bound to uphold" Pan's determination that Tesla be required to substantially reduce operations at its bustling factory.

"I reiterated that … Tesla was required to reduce all operations to minimum basic operations," Petersen wrote in an email immediately after the call. "We all decided that this legal disagreement would not be settled on this call, and that we would move to other items."

Petersen continued: "You clarified that Tesla was winding down operations in the city of Fremont to the minimum basic operations because it is the 'right thing to do.' You further stated that Tesla is still committed to winding down operations by Monday morning March 23, 2020, to a substantially lower number of employees onsite, who would be doing end-of-line batch work to protect the value of the vehicles and batteries, and other basic minimum operations, such as security, maintenance and cleaning. You agreed that social distancing requirements would be followed."

Tesla leadership extended an "open invitation" to Fremont police to inspect the facility "anytime," the emails show, an offer that Petersen said the department may take them up on in the coming days. It's not clear whether that's happened since. Multiple calls to the Alameda County Public Health Department and the city of Fremont the week of the shelter-in-place order were not returned.

Exactly how Tesla would be covered by either state or federal guidelines on "critical infrastructure" is unclear. The company has not responded to requests for comment about the situation. Emails sent to the five Tesla executives involved in the discussion were not immediately returned.

The Bay Area's shelter-in-place orders, which on Monday were extended to May 1, mirror federal guidelines on what is considered exempt infrastructure during the pandemic. They include emergency services, energy and nuclear industries, as well as food and agriculture, and health care. The manufacturing sector guidelines list "electric motor manufacturing" as well as "vehicles and commercial ships manufacturing."

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Tesla's stock price was cut in half from the beginning of the month to around the time of the confusion over whether it would close its plant at a critical time for the company: when it had just begun deliveries of its Model Y vehicles, which some analysts have called key to its continued success.

While it has since recouped some of those market losses, analysts do not expect the company to meet their expectations for first-quarter deliveries, which the company is expected to report this week. Some analysts and experts have said the coronavirus crisis is likely to drive down demand for Tesla's vehicles."

"Many of the factors that have shifted in the last month are not generally conducive to electric vehicle sales," said Karl Brauer, executive publisher of Autotrader and Kelley Blue Book.

Tesla may decide to follow up with local officials to plead its case for resuming production at the Fremont factory. But, like seemingly everything in the days of the coronavirus pandemic, that may have to wait a while.

"You are always welcome to send a written response if you would like to," Petersen wrote to Chia on March 24 in the most recent correspondence released to Protocol. "Regardless, none of that will be solved anytime soon."