Tesla CEO Defends Electric Cars After Battery Fire

"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 conventional gas-powered vehicle, Musk said in a blog post on Tesla's website.

Tesla shares fell more than 5 percent this week, the sharpest weekly decline since mid-August, after images and a video emerged Wednesday of a Model S on fire after an accident near Seattle Tuesday morning.

The fire occurred after the driver struck a large metal object on the highway. The object punched a hole three inches in diameter through the quarter-inch armor plate protecting the battery pack with a peak force of about 25 tons, Musk said.

The alert system onboard the Model S instructed the driver to pull over and he left the vehicle before the fire broke out. There were no injuries.

The video of the burning car was posted online Wednesday by auto blog Jalopnik and has been widely disseminated by other media. News of the accident sparked a sharp decline in the company's stock on Wednesday and Thursday.

Shares rebounded Friday and were up 4.4 percent at $180.98 on the Nasdaq.

The accident that led to the fire stemmed from a "highly uncommon occurrence," Tesla's head of sales and service, Jerome Guillen, said in an email exchange with the owner of the damaged Model S that was included with Musk's post Friday.

Guillen said the Model S drove over a "large, oddly shaped metal object" which hit the leading edge of the car's undercarriage and then rotated into its underside. Guillen described this as the "pole vault effect."

The driver, identified by the emails as Rob Carlson, said he was a Tesla investor and that the battery underwent a controlled burn that was exaggerated by images online.

"I guess you can test for everything, but some other celestial bullet comes along and challenges your design," Carlson wrote in the email.

A curved metal object that fell off a semi-trailer likely caused the damage to the car, Musk said. If a gas-powered car hit the same object on the highway, "the result could have been far worse," he added.

"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," Musk wrote in his blog post.

Musk did not say if Tesla would make any changes to the Model S battery design as a result of the accident. A Tesla spokeswoman did not immediately respond to an emailed question asking if such changes were under consideration.

The fire was the latest in a string of problems for lithium-ion batteries, which are used heavily in electric cars sold by various automakers. Such batteries are lighter and more powerful than lead-acid and nickel-metal hydride batteries, but they pose an increased safety risk.

This was Tesla's first battery fire. General Motors Co's Chevrolet Volt and Mitsubishi's i-MiEV have faced similar problems in the last couple of years. Boeing Co also dealt with lithium-ion battery fires in its new Dreamliner plane earlier this year.

Emergency officials at Tuesday's accident said firefighters struggled to extinguish the flames in the Model S.

Musk said in his blog post that firefighters were right to use water to douse the fire, but they erred in puncturing the battery's metal firewall. Doing so created holes that allowed the flames to vent upwards into the front section of the car.

(Reporting by Deepa Seetharaman; additional reporting by Ben Klayman; editing by Matthew Lewis and Andrew Hay)

DealBook: Nasdaq Chief Defends Handling of Trading Halt

DealBook: Michael Dell Defends His Leveraged Buyout Offer

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Apple Executive Defends Pricing in Case on E-Books

“Wow, we have really lit the fuse on a powder keg,” Mr. Jobs wrote in the e-mail dated Jan. 30, 2010, to Eddy Cue, Apple’s senior vice president of Internet software and services.

The e-mail was brought up as evidence during the second half of Mr. Cue’s testimony in a Manhattan courtroom on Monday, where much of the discussion focused on whether Apple intended to help the publishers raise Amazon’s prices.

Mr. Cue testified on Monday that Mr. Jobs’s e-mail was not a memo congratulating him about how Apple’s entry into the e-book market affected Amazon, causing it to switch to a business model called agency pricing, where the publishers, not the retailer, set the price of the books. Mr. Cue said Mr. Jobs was remarking on the company’s ability to “cause ripples” in the e-book industry, which was then largely dominated by Amazon.

While Mr. Cue conceded that some e-book prices had gone up as a result of agency pricing, he noted that many titles might not have become available in any digital store at all if Apple had not introduced agency pricing to the market. He said he had learned from his meetings with publishers that they were unhappy with Amazon’s uniform $9.99 pricing for e-books and that they were planning to use a tactic known as windowing — delaying the release of an e-book until after the more expensive hardcover had been in stores for a while.

Mr. Cue testified that both he and Mr. Jobs believed that “withholding books is a disaster for any bookstore.”

The Justice Department was not persuaded. Lawrence Buterman, a Justice Department lawyer, asked Mr. Cue whether he was aware that only 37 e-books had ever been windowed.

“The number doesn’t matter,” Mr. Cue said. “What matters is which books. Thirty-seven could be a huge number if it’s the right books.”

Both parties showed their evidence on a projector screen. Apple’s legal team used a MacBook to shuffle between evidence documents, stacking them side by side in split screens and zooming in on specific paragraphs.

In contrast, the Justice Department’s lawyers could show only one piece of evidence at a time. One video that Mr. Buterman played as evidence failed to produce the audio commentary needed to make his point.

In its antitrust case brought a year ago, the federal government is trying to cast Apple as the ringmaster that conspired with five big book publishers to raise e-book prices. The publishers have all settled their cases.

On Monday, the Justice Department’s lawyers homed in on a condition in Apple’s contracts with the publishers: the “most favored nation” clause, which required publishers to allow Apple to sell e-books at the same price as the books would be sold in any other store. Apple has said this clause existed to guarantee that Apple customers got the lowest e-book prices. But Mr. Buterman argued that it defeated Amazon’s ability to compete on price, and that it left Amazon with no choice but to switch to the agency model while allowing the publishers to raise prices.

Mr. Cue said he disagreed. He noted that Amazon had 90 percent of the e-book market before Apple entered the game.

“Amazon could have negotiated a better deal,” he said. “They had a lot more power.”

Lawyers for Apple and the government spent much of the hearing debating whether the e-mails exchanged between Apple executives and publishers illustrated Apple’s intent to help the publishers force Amazon’s hand. In one e-mail sent to Mr. Jobs, Mr. Cue was reviewing his meeting with the publishers, saying they were interested in solving the “Amazon issue.”

Mr. Cue said he was referring to the publishers’ ability to price books above Amazon’s uniform price of $9.99 in Apple’s iBookstore. Apple had proposed price caps of $12.99 to $14.99 for new releases. But he said this did not refer to enabling the publishers to force Amazon to raise prices, too.

Economix Blog: Bernanke Defends Stimulus as Necessary and Effective

The Federal Reserve’s chairman, Ben S. Bernanke, picked an unusual time to offer his most recent defense of the Fed’s campaign to stimulate the economy: 7 p.m. on a Friday night in San Francisco, 10 p.m. back home on the East Coast.

The basic message was the same as Mr. Bernanke delivered to Congress earlier this week: The Fed regards its current efforts as necessary and effective, and the risks, while real, are under control.

“Commentators have raised two broad concerns surrounding the outlook for long-term rates,” Mr. Bernanke told a conference at the Federal Reserve Bank of San Francisco. “To oversimplify, the first risk is that rates will remain low, and the second is that they will not.”

If rates remain low, it may drive investors to take excessive risks. If rates jump, investors could lose money – not least the Fed.

Regarding the first possibility, Mr. Bernanke said that the Fed was keeping a careful eye on financial markets. But he noted that rates were low in large part because the economy was weak, and that keeping rates low was the best way to encourage stronger growth. “Premature rate increases would carry a high risk of short-circuiting the recovery, possibly leading — ironically enough — to an even longer period of low long- term rates,” he said.

At the other extreme, Mr. Bernanke said the Fed could “mitigate” any jump in rates by prolonging its efforts to hold rates down, for example by keeping some of its investments in Treasury and mortgage-backed securities.

Three more highlights from the question-and-answer session after the speech.

1. Mr. Bernanke, asked about the outlook for the Washington Nationals, responded by accurately quoting the “Las Vegas odds” of a World Series appearance: 8/1.

2. Although the decision may be made under a future chairman, Mr. Bernanke said the Fed should continue to offer “forward guidance” — predicting its policies — even after it concludes its long effort to revive the economy.

“Providing information about the future path of policy could be useful, probably would be useful, under even normal circumstances,” he said in response to a question. “I think we need to keep providing information.”

3. Not surprisingly, Mr. Bernanke often is asked to reflect on the financial crisis. He offered something a little different than his normal response on Friday night.

“In many ways, in retrospect, the crisis was a normal crisis,” he said. “It’s just that the intuitional framework in which it occurred was much more complex.”

In other words, there was a panic, and a run, and a collapse – but rather than a run on bank deposits, the run was in the money markets. Improving the stability of those markets is something regulators have yet to accomplish.