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By Paul A. Eisenstein
As the new board chair of Tesla, Robyn Denholm enters rarified territory, one of the few women to reach the upper echelon of what had long been a boys’ club, joining General Motors’ Mary Barra, the only other female chairman in the auto industry.
While the electric car maker remains short on cash but long on ambition, the 55-year-old Australian will face some tough and immediate challenges at a company that only recently delivered a rare profit. But perhaps the biggest test for Denholm will be finding a way to rein in the increasingly erratic behavior of Elon Musk, the 47-year-old chief executive officer whose August tweets about taking Tesla private led the Securities and Exchange Commission to force him to relinquish the chairman’s post.
“I believe in this company, I believe in its mission and I look forward to helping Elon and the Tesla team achieve sustainable profitability and drive long-term shareholder value,” Denholm said in a statement issued after her appointment was announced on Thursday.
Though Denholm has been an independent Tesla director since 2014, her appointment came as a surprise to outside observers who had been expecting a more high-profile choice. Barely a month ago, speculation centered around 21st Century Fox’s CEO James Murdoch. The media executive had his shortfalls, however, including his ties to the controversial Fox News channel, as well as a lack of experience in the auto industry.
Denholm, who will be coming on full time with Tesla within the next six months, has been serving as the chief financial officer for the Australian telecommunications company Telstra, but she has also worked at Toyota, serving as finance manager for the carmaker’s operations in her home country.
Her experience in financial management should prove critical for Tesla. The company’s high-flying stock price can’t conceal the weakness of its balance sheet. The electric car manufacturer delivered a surprise, $311.5 million profit — rather than the more than $200 million loss industry analysts had forecast for the third quarter. It was only the third time Tesla was in the black since going public in 2010 and it appears to bode well for Musk, who had promised his company would be profitable and deliver positive cash flow for the second half of 2018.
Still, there are a number of observers who question whether Tesla can, as Musk insists, fund its aggressive growth strategy without going back to the well for another capital infusion over the next year or so. Not only does the company have to spend millions to boost capacity at its Fremont, California, assembly plant but it also has to pay for the construction of a second plant going up in Shanghai. And then there are all the new products that Musk, who will continue as CEO, has promised:
- A second-generation Roadster
- A compact SUV to complement the new Model 3 battery-sedan
- An all-electric full-size pickup truck
- A battery-electric semi-truck.
In her post as a board member, Denholm appeared to support Musk’s ambitious master plan, but she will now have greater responsibility in ensuring it can all be funded.
Yet, that might not be her biggest challenge. Since last spring, the South African-born Musk’s behavior has become increasingly controversial. He first came under fire when he derided several industry analysts during a first-quarter earnings call. He subsequently got into a flame war with a British diver who helped rescue a group of Thai teens trapped in a flooded cave and now faces a defamation lawsuit. Musk tossed fuel on the fire when he lit up a joint while appearing on comedian Joe Rogan’s podcast.
But the biggest problem followed his August tweet in which he announced a plan to take Tesla private, declaring “Funding secured.” It turned out Musk had only had the most preliminary discussions with officials from a Saudi Arabian sovereign investment fund. The plan quickly collapsed and the SEC sued Musk, something that could have seen him banned from holding a management position in a public company for life. The settlement required Musk to step down as chairman and pay a $20 million fine — which critics said was barely more than a speeding ticket for someone of his wealth.
Finding a way to encourage Musk’s creativity, even while smoothing out his quirky behavior has been something that Tesla’s friends and foes alike have been hoping to find in a new chairman.
“Can (Denholm) check Elon? I’m not sure, and I’m not sure if anyone could check him. Maybe his brother,” Kimbal Musk, Baird analyst Ben Kallo said in an interview with CNBC. “But I think if they had his brother as chairperson everyone would be up in arms.”
If anything, initial reaction to Denholm is that they found a perfectly boring sort of finance wonk who can offset the mercurial Musk.
For his part, the CEO seemed pleased with his new chair. “Would like to thank Robyn for joining the team. Great respect. Very much look forward to working together,” Musk said in a tweet.
How the pair wind up working together in their new roles should become obvious quickly considering the CEO’s addiction to Twitter.