San Carlos (CA) - Tesla Motors announced that it will begin laying off employees and delay the production of their battery-powered sedan “Model S”. The start-up also decided to remove Ze’ev Drori as chief executive and replaced him with Elon Musk, the company’s chairman.

Musk, who is better known as the co-founder of PayPal, announced the upcoming changes in his personal blog on Tesla’s website. The goal of the changes is to create positive cash-flow within six to nine months. Musk wrote that “It’s not an understatement to say that nearly every business will be impacted by what has unfolded in the past weeks, and this is true for Silicon Valley as well.” He also mentioned that the company is currently in a “critical phase”.

The bomb was dropped when many venture capitalists sent warnings to start-up companies, advising that cutting expenses and becoming profitable is going to be not only key, but necessary if they have any desire to succeed during a recession. Tesla has had a rough year, following earlier layoffs, production delays, and changes among its executive ranks.

Drori, who replaced the co-founder Martin Eberhard, was in place as chief executive since November. He is asked to stay on the board as vice chairman. It has yet to be mentioned how many individuals will lose their jobs, but the Detroit office will be closing, Musk said.

The Model S sedan, the second and more economical of Tesla’s electric vehicles, is now expected to be in production by mid-2011.
 
A major reason for Tesla’s delay in production seems to be a lack financing. Tesla was making strides to raise $100 million to add to its already collected $155 million. The company now plans to wait for a low-interest loan from the U.S. Department of Energy. The loan cannot be put into use until the new headquarters and factory in San Jose pass an environmental review.

Until then, the company will continue to focus its efforts on the Roadster, which currently has a one year waiting list and a price tag north of $100,000. Tesla will also sell powertrain products to other car manufacturers, which Musk claims will be a highly profitable business.

According to Musk, Tesla is close to being cash positive.