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I owe the headline to David Hannemeier Hansson (DHH) who said it best in a tweet on Saturday, 2/25/2012, "[The] Tesla fiasco proves once again that it's rarely the original transgression that gets you in trouble -- it's the cover up!"

The corollary: "It is always the solution that makes the difference to FUTURE potential customers, not the problem."

So far, this "bricked" battery thing has been another squandered opportunity for Tesla (NASDAQ:TSLA). Tesla should have used this tiny, little, insignificant trivial story on a few bricked batteries to show how it was doing a FULL root cause investigation to get behind the problems with parasitic current draws. When the moment came for Tesla's test, it behaved like a spoiled software hacker -- it could have had a free PR goldmine -- it could have showed Toyota and all the other automotive OEMs how complaints could be handled even better; for a few thousand dollars, this could have been a crowd-sourced EV teach-in and Tesla lovefest. The "teachable moments" in life like this cannot be wasted.

Instead, Tesla stock is likely to eventually become a "brick" because Elon Musk and Tesla never bothered to RTFM on topics like warranty management systems [for complex products like automobiles, defense systems, industrial equipment], root cause analysis and corrective action, failure mode and effect analysis (FMEA). Tesla's approach, a poorly-executed form of "shoot the messenger" is never going to replace these systems.

What Tesla should be doing [rather than smearing whistleblowers] is publicizing its proactive investigation into the matter. It should be explaining [soothing customer doubts, not fanning irrational fears] by doing something like this:

1. Tesla should be completing a full root cause investigation of why the specific issue occurred. It is necessary to list, analyze and mitigate ALL of the different parasitic current draws that could potential drain a batteries. In the automotive world we'd call this thing a System FMEA. A responsible company would use every possible opportunity to add to it knowledge of why a battery might discharge on its own. This kind of knowledge is the proprietary knowledge that is truly valuable -- it is knowledge that competitors can't replicate or copy.

2. Tesla should be looking into why this kind of thing wasn't detected and eliminated in its design process before it ever impacted a customer. What is it about the Tesla culture that makes it ok to transfer a major problem for the customer or to tell a customer after there's a problem to RTFM. $40,000 punishment for not reading the manual in detail is ridiculous [even though EV customers should know they are buying bleeding-edge half-baked technology].

3. Tesla should also be looking at what is wrong with Tesla's warranty management and service organization. Why didn't someone in the Tesla organization get after this early on and find a way to negotiate a workable solution with the customer and the relevant Tesla suppliers -- maybe 33 - 34 - 33 cost share [between suppliers, Tesla and the customer] on the battery replacement. Why not dispatch a team of Tesla and supplier engineers to crawl all over the vehicle [with the customer] looking for drivers of the problem? Why did Tesla alienate and ex-communicate a customer/blogger rather than look for a way to involve that individual and to convert him to part of the Tesla cult of unquestioning believers?

The "brick" story won't go away; the actual battery problem was tiny... calling a customer fears irrational and smearing the whistleblower is something that just is not done unless Tesla wants to establish a reputation for poor customer service. Using media to intimidate, threaten and smear a customer for making a public customer complaint is something that just blows away billions of dollars of customer goodwill. If Tesla follows the same modus operandi that it has followed in the past with Top Gear -- it will try to threaten and intimidate first, then it will fill a libel case, get rejected, file a 2nd libel case, get rejected again and then plot its next move as it keeps attacking the messengers.

Tesla generates lots of sparks and peels around like a toy car with brand new battery -- but producing a real automobile is for grownups. Most software crash is trivial compared to even the chance of an automobile crash or the crash of a safety-critical system. Expecting that problems will go away when customer of a sophiticated, expensive durable good to "just RTFM" might work in the world of software hackers but in the world of automobiles, RTFM is "BRICK" strategy from "brick" company.

Source: Tesla Battery Fiasco Shows 'It's Never The Event, It's The Cover-Up'

Additional disclosure: I also hold option positions. I trade Tesla. My inventory changes. I try to make money on Tesla when it moves up or when it moves down. If I thought Tesla were going to stand still, there's a way to make money from that, too. My advice is not accept anything that anyone says about Tesla either good or bad without checking it out thoroughly ... Tesla has potential to shock investors in ways that they do not expect.