Tesla Crisis Media Relations Case Study

An Analysis of Teslas Response to the Tesla Model S Fire Incident

Yuming Huang

A45612931

ADV860 Media Relations

Michigan State University

Table of Contents

I. Company Background.3

II. Case Overview.3

III. Key Stakeholders.3

IV. Communication Objectives & Key Messages.4

V. Media Responses.5

A. Positive Messages...5

B. Negative Message...6

VI. Implications..7

VII. Appendices...8

VIII. References..10

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I. Company Background Tesla Motors Inc. is an American company, which was built by a group of Silicon Valley engineers in 2003. They design, produce, and sell electric vehicles, and electric powertrains. The first model that attracted widespread attention to Tesla was the unprecedented Tesla Roadster in 2008. More than 2,300 were sold in four years in over 37 countries. The second generation includes the Model S and the Model X. Both of them are high-end fully electric luxury sedans. Tesla also produces electric powertrains to supply to other automakers, such as Toyota and Daimler. II. Case Overview On October 1, 2013, after hitting metal debris on a highway in Kent, Washington, a Tesla Model S caught fire. The driver hit something while driving on the High-occupancy vehicle lane of Washington State Route 167. Since the onboard alert system reported a problem and required the driver to stop the car, he exited the highway. The driver left the car without harm at the end of the exit ramp before his car started to burn from the front of the vehicle. A witness recorded the fire with his smart phone and posted this video on YouTube, which went viral immediately. Firefighters, according to the incident report, tried to extinguish the fire with water, however the battery was reignited under the vehicle. They eventually extinguished the fire by directly applying the water to the burning battery. Tesla stock declined 6.24% and 4% in Nasdaq trading respectively the following two days after news of this incident. III. The Key Stakeholders In order to reduce the damage caused by this incident, Tesla needed to appropriately communicate with consumers, investors, and mass media. Consumers First, Tesla needed to appropriately communicate with the driver whose Tesla Model S was burned in this incident. It had to be determined whether Tesla would replace his car or refund him the money he paid for the vehicle. These were the drivers problems, as well as the mass medias. In this situation, if Tesla were able to suitably satisfy the drivers needs and wants, then it would have been more likely that the driver would have positively contributed to the damage control through good word of mouth. Moreover, owners and the potential consumers of Tesla cars are the key stakeholders. They were eager to know the official and reliable information about the battery safety in Teslas cars. If Tesla failed to convince these people of the safety of the battery pack, the company might face long-term negative public opinion, more consumer vehicle complaints, as well as a reduction in sales.

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Investors Tesla investors are also stakeholders who are eager to know the information about how successful Tesla addressed this incident. This group is concerned about the financial performance of Tesla. In this way, Tesla has the responsibility and obligation to inform investors with necessary information that could influence the stock price of the company. Mass media Tesla needs to address mass media, as another key stakeholders. Mass media functions as a bridge between the company and the general public. While news outlets monitor any potential danger to the public, the public also needs media to obtain information. The image and reputation of Tesla partly depended on the coverage of media. Specifically, Tesla needed to provide sufficient, accurate, and timely information to mass media. This is important for the news outlet to accurately report the incident to avoid false information shared with the public. Moreover, instead of a passive response to the incident the company needs to actively direct mass medias coverage of the incident. IV. Communication Objectives & Key Messages One day after the accident, Elizabeth Jarvis-Shean, Teslas director of globe communications, released a 62 word official response to the press (See Appendix A). Forbes criticized Tesla stating Tesla should be doing more in the meantime (Elliott, 2013). Three days after the incident, Elon Musk, Chairman, Product Architect and CEO of Tesla, released a statement on Teslas official blog (See Appendix B & C). In this statement, he explained what happened and what caused the fire in detail. Moreover, Musk compared the electric car with conventional gas-powered car, and concluded that driving an electric car is safer. The overall communication objective of Musks statement was three-fold: spreading the truth to stop the incorrect Tesla rumors, increasing media coverage to build companys image and reputation, as well as building owners and consumers trust toward Tesla. In order to achieve Teslas communication objectives, Musk, in his blog, utilized several key messages. Explain the accident as an extremely uncommon occurrence A large metal object, which was a curved section that fell off the semi-trailer, caused the fire. It went under the car and punctured the quarter inch armor plate with a peak force of 25 tons. Through depicting this extremely unusual circumstance, Musks blog clarified the accident was not caused by the vehicle.

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Tesla appropriately designed to face extreme circumstance The vehicle correctly and safely performed, as it was designed to, during the accident. The onboard alert system instructed the driver to pull over and allowed him to escape from the vehicle without injury. The internal firewall within the battery pack offered a solid barrier, which effectively limited the fire only to the affected zone. The vent directed the flame toward the road, instead of entering the passenger compartment. Improper procedure In order to directly apply water to the source of the fire, firefighters inappropriately punctured the batterys protective plate. The newly created holes on the metal firewall allowed flames to spread into the front trunk section. Nonetheless, the fire could be quickly extinguished. Conventional gasoline car is more vulnerable The result would be worse if a gasoline car faced the same circumstance on the highway. Since the underbody of a gasoline car is only equipped with a thin protective metal sheet, the puncture of the gas tank can cause gasoline to pool and burn the entire car. Electric vehicles are safer than gasoline vehicles Musk explained in his detailed blog post that the combustion energy of our battery pack is only about 10% of the energy contained in a gasoline tank and is divided into 16 modules with firewalls in between. Moreover, Musk pointed out that statistics showed that drivers are five times more likely to experience a fire in conventional gasoline car than a Tesla. Hence, in terms of fire risk, he claimed that electric cars are safer than conventional gas-powered cars. Good communication earn the drivers support In Musks blog, he also posted the car owners response (See Appendix C). In this email, the driver said he understood the accident happened in an extreme circumstance. He claimed Teslas design and engineering worked well in this accident. Moreover, he appreciated the support from Tesla, and looked forward to getting another Tesla car. V. Media response Musks response was widely spread through news outlets. While a large portion of media coverage quoted from Musks blog in a positive way, there were also some negative media responses that Tesla would not have liked. A. Positive message Prominent news outlets, such as Los Angeles Times, New York Times, The Wall Street Journal, The Washington Post, and Time magazine, referred to Musks argument that electric cars are safer than conventional gas-powered cars. For consumers concerned about fire risk, there should be absolutely zero doubt that it is safer to power a car with a battery than a large tank of

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highly flammable liquid (Musk, 2013). Additionally, some of the coverage quoted sentences from the blog to describe the point that conventional gas-powered cars were more vulnerable (Hirsch, 2013; Owens, 2013; Woodyard, 2013). Los Angeles Times, San Jose Mercury Journal, and USA Today used this same quote from Musks blog, "had a conventional gasoline car encountered the same object on the highway, the result could have been far worse" (Musk, 2013). Furthermore, quotations were cited to explain that the circumstance would be worse if a conventional gasoline car caught fire on a highway. On the subject, Musk said, a typical gasoline car only has a thin metal sheet protecting the underbody, leaving it vulnerable to destruction of the fuel supply lines or fuel tank, which causes a pool of gasoline to form and often burn the entire car to the ground". Los Angeles Times and San Jose Journal quoted this statement. Besides described the comparison between gas-powered and electric cars, most of the coverage, which has been mentioned above, reported on Musks blog content about what caused the fire and how the car correctly performed. From Musks blog, he said a curved metal component was apparently the culprit in causing a Tesla to catch fire, writing that the objects shape led to a powerful hit (The associated press, 2013), New York Times wrote. B. Negative messages Tesla and Elon Musk being defensive Prominent media used defense in their headlines, which implied that Tesla had something to be guilty about. USA Today said Musk was never shy about personally blogging in defense of his company's electric car (Woodyard, 2013). He has taken to the Web against in reaction to fallout over a video showing a Model S that caught on fire (Woodyard, 2013). Although Musks blog was a direct response to the incident, Tesla would not like reports, which described their company and Musk as being defensive. Elon Musk wanted to stop Tesla bleeding Los Angeles Times described Musks reaction as a move to put out the financial fire (Hirsch, 2013). USA Today wrote, Musk's reaction comes as Tesla shares fell after the accident (Woodyard, 2013). The blog attached the email from the owner, who experienced the fire, to substantiate Teslas communication with him. However, Time magazine depicted this supportive email as a way to offer comforting words to current and potential clients and investors (Rayman, 2013). Elon Musk blamed firefighters

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With the headline Elon Musk blames firefighter for making Tesla sedans fire worse(Rayman, 2013), the lead of the Times article stated, the fire fighters didnt read the drivers manual. This coverage explained the fire spread because, first responders wrongly punctured a hole in a metal firewall. Obviously, the content, in some degree, distorted the meaning of the blog. Musk had pointed out that the fire could have been extinguished easier if the firefighters had not punctured a hole in the plate. Musk, however, did not intend to blame the firefighters. VI. Implications Tell the truth, and be transparent One of the best ways to stop Teslas rumors and calm peoples anxiety is telling the truth and being transparent. In Musks blog, he explained what, how, and why of the accident in detail. Moreover, in the blog, he also posted the email from the owner whose Tesla sedan caught fire. All the content showed that Tesla is telling the truth, and being transparent. This resulted in coverage that corresponded to key messages in Musks blog, which helped Tesla achieve its communication objectives. CEO directly responses When an organization is facing a complicated and serious issue, the boss might be the suitable person to respond to the crisis. The media would not stop asking questions unless receiving information from the boss. Owners and customers also desire to listen to the voice from the most important person in the organization. The situation could be worse, if the boss leaves reporters to write about issue and explain it without official response and information. Avoid using jargon In Musks blog, he clearly explained the complicated mechanical problem without using jargon. Without jargon in the blog, there is no barrier to understand the situation. This contributed to more quotes in coverage, because reporters knew their readers can understand what the blog is talking about without their explanation. Meanwhile, it prevented mass media to misunderstand and distort the blogs meaning. Well prepared before releasing When a company faces a serious circumstance, an immediate response is needed. Tesla achieved this through the first 62-word statement. However, it is important to consider quality in addition to time. Tesla again achieved this by having Musk follow-up on the brief statement with a thorough blog post. As such, this case teaches us that companies can put communications, business, legal, and engineering teams together to formulate their final response in an effective manner that is still time appropriate.

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Appendices

Appendix A

Appendix B

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Appendix C

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Reference Elliot, H. (2013, October 3). The Tesla fire is a textbook PR problem-and they should fix it. Forbes. Retrieved from http://www.forbes.com/sites/hannahelliott/2013/10/03/the-tesla-fire-is-a-textbook-pr-problem-and-they-should-fix-it/ Hirsch, J. (2013, October 4). Teslas Elon Musk defends Model S electric car after fire. Los Angeles Times. Retrieved from http://articles.latimes.com/2013/oct/04/autos/la-fi-hy-musk-tesla-fire-20131004 Musk, E. (2013, October 4). Model S fire. Retrieved from http://www.teslamotors.com/blog/model-s-fire Owens, J.C. (2013, October 4). Biz break: Elon Musk says Model S fire proves Teslas are safer than gas-powered cars. San Jose Mercury News. Retrieved from http://www.mercurynews.com/60-second-business-break/ci_24241418/biz-break-elon-musk-says-fire-proves-teslas Rayman, N. (2013, October 4). Elon Musk blames firefighters for making sedans fire worse. Time. Retrieved from http://business.time.com/2013/10/04/elon-musk-blames-firefighters-for-making-tesla-sedans-fire-worse/ Russolillo, S. (2013, October 4). Musk explains why Tesla Model S caught on fire. The Wall Street Journal. Retrieved from http://blogs.wsj.com/moneybeat/2013/10/04/elon-musk-explains-how-model-s-caught-on-fire The associated press (2013, October 4). Elon Musk defends Tesla car after fire. The New York Times. Retrieved from http://www.nytimes.com/2013/10/05/business/elon-musk-defends-tesla-car-after-fire.html?_r=0 The associated press (2013, October 4). Tesla CEO explains cause of fire in electric vehicle. The Washington Post. Retrieved from http://www.washingtonpost.com/business/economy/tesla-ceo-explains-cause-of-fire-in-electric-vehicle/2013/10/04/378dad9c-2bae-11e3-b139-029811dbb57f_story.html Woodyard, C. (2013, October 4). Elon Musk defends Tesla electric car after fire. USA Today. Retrieved from http://www.usatoday.com/story/money/cars/2013/10/04/elon-musk-tesla-fire/2924423/