Presumably, Martin Eberhard's acquiescence comes at a price. The ousted electric-car-company founder sued Musk (pictured) for libel, slander and breach of contract barely three months ago following months of building tensions. After Tesla won hundreds of millions of dollars in federal aid and started putting its affairs in order, Eberhard dropped his suit, and now the two sides have confirmed a deal, according to the blog Legal Pad.

Among many other allegations, Eberhard's suit had disputed Musk's right to call himself a founder, since he wasn't around for the actual birth of the company, while Musk claimed he could call himself that because he did so much to help the company in its early years, a dubious definition he also used to call himself a "co-founder" of PayPal. Eberhard has surrendered, and not just in a grudging manner: In an official statement, according to Legal Pad, he writes, "As co-founder of the company, Elon's contributions to Tesla have been extraordinary." Yes, Musk has made extraordinary contributions, not just managerially, but linguistically, as well.

(Musk pic: JD Lasica)

Eberhard has suddenly dropped his suit, the San Jose Business Journal reports. It seems safe to assume some sort of settlement was reached; the $465 million in federal funds Tesla received from the Department of Energy after Eberhard filed could have freed up other cash for a payout, or convinced Eberhard that Tesla had the resources to mount a protracted fight. Or maybe Tesla was simply scared: it just lost a preliminary motion to throw out the case.

Tesla's money also helped it secure land in the Stanford Research Park, not far from Facebook's new headquarters, replacing a San Jose parcel it had planned to acquire but lost in January thanks to its lack of capital.

Now the company can turn its attention to the real challenge: Fighting off Nissan, which just rolled out its "Leaf" electric car, which it plans to introduce in 2012. Nissan, which will lease the battery pack separately, has said its car will compete with gas-powered vehicles costing $25,000-$30,000. Tesla CEO Elon Musk, meanwhile, has staked his company's future on the Model S, which is a full-sized sedan to the compact Leaf but starting around $50,000. In addition to an apparent price gap, Tesla must also wrestle with the recent departure of its science director, in charge of the critical battery system. And it must site and build a factory to manufacture the S itself.

Like most startups, Tesla has been through its share of booms and busts. Right now it's on a roll; the question is whether it can build up enough momentum for the inevitable crash back to reality.

[lawsuit news via Business Insider]

One of the real founders of Tesla, ousted CEO Martin Eberhard, argues that Musk didn't actually start the company. Reasonable! But no barrier to Musk: He has argued he should be called co-founder of PayPal for contributing to PayPal's "viral growth mechanism" and "business model." What really happened: Musk talked his way into a merger with payments company Confinity several months after Confinity launched a product called "PayPal."

Musk's arguments about Tesla are much the same; he just told the Associated Press "we had to basically rebuild the company," and thus he has claim on the title "co-founder." Of course, if cleaning up someone else's mess makes one a co-founder, every taxpayer in America can rightfully say he helped start Tesla, along with GM, Goldman Sachs and other corporation bailed out by the government. Be sure to thank Musk when you update your resumé.

At least, that's the way Musk is telling it:

Given that Daimler prides itself on integrity and conducted exhaustive due diligence, they would not have insisted that I remain CEO as a condition of the deal if Eberhard's attacks had merit.

Daimler's "cash infusion" (Musk's word) should be crucial to Musk's electric car company; just before the money came in we reported Tesla was running on fumes after nearly running out of cash last fall. So Musk will be awfully hard to oust if the Daimler deal really does lock him as CEO, if only because Tesla needs all the liquidity it can get.

Musk is said to have kept cash tight at PayPal to advance his control of the company; the Daimler clause accomplishes a similar goal at Tesla, albeit by different means. It would appear Musk is in the driver's seat, at least until another sugar daddy comes along.

After all, so much about Tesla is not what it appears. But a lawsuit just filed by Tesla co-founder Martin Eberhard, who says he was unjustly pushed out of the company, shows top company executives could be as jumpily obsessive about getting their hands on a company roadster as anyone else. That's a vote of confidence on the trendiness of the end product, if nothing else.

Even after he was shoved aside as CEO and left the company, Eberhard desperately wanted a promised Tesla Roadster. He was thwarted no fewer than three time according to Wired's Chuck Squatriglia, who took a deep dive into the lawsuit documents:

Eberhard claims he was to receive the first Roadster to roll off the assembly line, but [Chairman Elon] Musk allegedly insisted it was his. The suit says Eberhard agreed to take the second car - which he says would be worth far less as a collectible - and got the deal in writing, only to see Musk allegedly sell the car to a friend in February, 2008.

At about that time, Tesla allegedly told Eberhard his car was on its way but would have to undergo "endurance testing." Several months later, according to the suit, Eberhard learned an unnamed Tesla employee "had driven Eberhard's Roadster into the back of a truck, almost completely totaling the vehicle." The damage was so bad, the suit states, that the car "required the replacement of no fewer than 75 different parts."

(The crash had been previously reported.)

There's apparently two kinds of Tesla employees — current employees and former employees suing Tesla. Frankly, we're not surprised Eberhard's suing Musk and Tesla. We're more surprised that it took this long to happen especially given Musk's propensity for diarrhea-of-the-mouth types of comments. For the moment, the only thing we have to go off of is the PDF file from the California Superior Court — which you can see here.

In response, we're told Tesla plans to counter-sue Eberhard. That went over real well with Henrik Fisker — let's see how well it works here. All we know is we're just proud Eberhard quotes former-Valleywag Owen Thomas in his court filing. Gotta love the V-wag love! (Hat tip to Owen!)

Photo Credit: Yodel Anecdotal @ Flickr

Eberhard and Musk have long feuded, even before Musk ousted Eberhard as Tesla's CEO. But I'd note that for once, they're not outright contradicting each other here.

It's far more common for Musk to have a version of events that conflicts with everyone else's accounting. His history of events at PayPal, the electronic-payments startup he cofounded, seems to be shared only by him. And Musk has been telling everyone who will listen that SpaceX, his rocket startup, has a "Nasa contract to build the Space Shuttle replacement after 2010." If you ask Nasa administrators, they'll say that's more than a stretch of the truth. (In fact, SpaceX is competing for a contract, but it has only hit some of the milestones; Nasa is currently planning to rent out space on Russian rockets to supply the International Space Station, and a future supply contract for SpaceX is a possibility, not a certainty.)

So Musk has a tenuous relationship with reality. Is this a handicap in his business? Apple CEO Steve Jobs is famous for his "reality distortion field" — a charisma that leads others to believe the most exaggerated claims, because the vision behind them is so compelling.

Of course, Jobs actually has brought his outlandish vision to life four times: With the Apple II, the Mac, the iPod, and the iPhone. Musk has realized the Roadster, and SpaceX has managed, after several crashes, to launch one lone rocket. He's also got SolarCity, a startup which installs solar panels on roofs.

If in 2011, we live in a shiny future where we drive Tesla cars powered with clean electricity from SolarCity panels, and SpaceX's Falcon1 rockets are supplying orbital space stations, then we will be living in a reality of Musk's making — much as Jobs envisioned the iPod in the dark days of October 2001, and then, three years later, saw them everywhere on the New York subway.

There's another possibility, however, which would also make Musk like Steve Jobs — the Jobs of two decades ago, who was forced out of Apple by the CEO he hired. Tesla could go under, SpaceX could fail to win the Nasa contract, and SolarCity could get beaten down by rival cleantech startups. And then Musk, driving his Roadster on the lonely roads of Silicon Valley, would find himself facing a reality not constructed in his mind. An unpleasant thought, that. Far easier just to succeed.

Kind of boring. If you like amusement-park rides, you'll love the Tesla Roadster. If, like me, you sit there calculating the infinetesimal odds that the operator's insurers will allow a rollercoaster to actually pose any real danger to you, you'll hate it. I spent the ride up to Coit Tower and back thinking about how much coal was burned to generate the electricity now being thrummed away by the Roadster's motors.

Back at the bar, Musk was affable enough, considering I've hinted he's taking out his midlife crisis on his employees and may be scheming to take over Tesla Motors completely by running it into bankruptcy. He laughed at the last idea, and then thanked me for the suggestion, saying he hadn't thought of that particular financial maneuver.

Musk still blames cofounder Martin Eberhard for Tesla's current straits. When Tesla raised its fourth round of funding in 2007, Musk says, Eberhard, then CEO, told investors that the Roadster's cost was $65,000, giving it a $25,000 gross margin. "It's right there on the slide, with Martin's name on it!" Musk told me. The company, he adds, was already in the middle of a search for a CEO to replace Eberhard.

A private-equity firm which had invested in Tesla sent some consultants to help Tesla sort out supply-chain issues, and they found that the Roadster's parts actually cost the company $140,000. "We might as well have sent customers $50,000 and saved the bother of making the car," said Musk. Former Flextronics CEO Michael Marks, a Tesla investor, confirmed their findings — and that's when Musk decided to fire Eberhard and replace him temporarily with Marks. Just as now, the company's cash position was running low, and Tesla tapped existing investors for new funding, despite having just raised a round. He revealed none of this at the time, he says, because it would have jeopardized the company's ongoing CEO search. (Not that that worked out particularly well; Musk installed Ze'ev Drori, then replaced him last month.)

That's Musk's version, anyway. I'm skeptical, if only from experience with Musk; when he was running PayPal, I remember him making statements that company insiders told me didn't match the facts. But as he was leaving to drive back to the Valley, Musk mentioned that his divorce from his sci-fi novelist wife Justine was a mutual matter; he got the paperwork in first, but she was getting ready to file papers, too. That, at least, checks out. I'm still not sure if I should trust Musk's account of what led Tesla to these perilous straits. But I do believe now that he's brave enough to drive a Roadster up to San Francisco and deliver it in person.

In a bankruptcy, holders of Tesla's debt will have priority over all holders of common and preferred stock in the company — including the Valley celebrities like Google cofounders Larry Page and Sergey Brin and eBay billionaire Jeff Skoll who have invested in Tesla. Raising this round of debt, followed by a bankruptcy filing, could be Musk's way of squeezing out other shareholders — especially cofounders Martin Eberhard and Marc Tarpenning. Employee with unexercised stock options will get wiped out in such a scenario.

Current shareholders will have a right to invest in this debt round according to their current share — but Musk may well be counting on the short 30-day offering period and tight financial markets to shut out anyone who doesn't have the cash handy.

Why do I think this is a likely scenario? Because Musk has done something similar before.

When Musk briefly served as PayPal's CEO, he'd run the company's bank account to six weeks' worth of cash. PayPal insiders say Musk was pulling "financial machinations" to maintain his control of the company — but the board fired him instead and replaced him with cofounder Peter Thiel, who steered the company to its $1.5 billion purchase by eBay.

Unfortunately for Tesla, there's no obvious white knight like Thiel on the horizon.

“It’s taken us about a year to correct major errors,” Mr. Musk told the New York Times. Eberhard has a snappy response: “Look at the constant factor at the company through all the years: Elon.” A history lesson from PayPal: Not until Peter Thiel replaced Musk as CEO, and he ceased day-to-day involvement with the company, did it thrive. (Photo by Peter DaSilva/New York Times)

"Tesla's Whitestar and Darkstar programs are DOA. The Detroit office is in trouble. it's all hands on deck to get the roadster to work"

I am writing for two important reasons:

1. To update you on the status of the Tesla Roadster program and your car
2. To let you know about a recent change in my role at Tesla Motors

First, the change in my role. I have had the distinct pleasure of being CEO of Tesla Motors for four years now, growing the company from two people in a tiny office in Menlo Park to 250 people spread around the world. The Roadster, once just a crazy idea of mine, is now almost ready for production, thanks to the hard work and quite a few strokes of brilliance by our team.

This week I move from the CEO position to become President of Technology, and I remain on Tesla's board of directors. In my new job, I will focus on the final details of the Roadster and on advancing Tesla's leadership in our core technology. I will also be able to spend more time with you, our customers. My passion is for creating technology that brings about meaningful change, and for the people who embrace such technology. As we move towards production and contemplate the choices ahead of us, we at Tesla need leadership with that same kind of passion and talent for operations - passion that will secure Tesla's future as the next major automobile company.

I initiated an intense CEO search some time ago, but the board and I have yet to find the right person to fill this role - even as Tesla continues to grow and its operational needs become paramount.

We are incredibly fortunate that Michael Marks, former CEO of Flextronics, the world's largest contract manufacturing company, has agreed to serve as CEO on an interim basis. Michael grew Flextronics from a small company to the 19 billion dollar powerhouse it is today. He is also an early investor in Tesla Motors and a customer. We could not ask for more able leadership during this transition. The Board and I will continue to search for a CEO to lead Tesla on a permanent basis.

Now, let's turn our attention to the Roadster. The excitement is building as we move towards the start of production. And naturally, the question on many Tesla customers' minds is "When will I get my car?"

The short answer is: We are still planning to start production of the Roadster by the end of next month and deliver the first cars to customers this fall. We have a good chance of meeting this goal, but to be fully transparent, I want you to know that while it is within our reach, it is not yet fully within our grasp.

Since my last formal update to you in December, we've made tremendous progress in building and testing the second generation prototypes. With each successive technical improvement, the driving experience has improved as well. We're waiting to publicly announce the results of our EPA range validation tests until all the results are in, but I'll let you know in advance you will be pleased. You are going to love this car.

So what's left to do? Testing, testing and more testing. It falls into two major categories.

* Crash testing. We're in the midst of final crash testing now, as outlined in the most recent issue of The Roadster newsletter. We feel confident about passing these tests, since we conducted these same tests on the first generation prototypes much earlier in the program. However, there is always the chance that something unpredictable occurs causing us not to pass this time, in which case we would incur a delay to address the issues. As soon as we complete crash testing our customers will be the first to know.

* Durability testing. This is where it all comes together to ensure that your car is durable and reliable. Durability testing includes both the mechanical components of the Roadster and also the software that controls everything from door latches to battery cooling. This testing has been underway for some time and will in fact continue after we start production of cars. This is typical of all car manufacturers; we want to insure that our test cars discover any long-term durability issues ahead of your car. We will soon enter the next phase of durability testing that incorporates all previous fixes. The results of this testing are critical to the schedule.Once we enter production, we will build the first cars very slowly - about one per week - accelerating as we gain experience. It takes about 5 weeks to ship the car from the U.K. to the U.S. So a September production start translates into an early November delivery of the first car to a customer.

We will hold short of projecting a specific delivery date for your car until we work through the milestones outlined above. In the meantime, we are working to the general timeframe of delivering Founders' Series cars this year, Signature 100 cars in Q1 2008 and other customers' cars after Q1 depending on when you placed your reservation. If we incur any additional delays due to the ongoing testing, I will let you know.

I want to express my deep gratitude for the trust you placed in Tesla when you reserved your car and for your willingness to embark on this journey with us. During this development program, I have learned that the first 5% and the final 5% of the creation of a car are the most difficult to achieve. We are going to build and deliver a great car for you. We're in the final 5% now and the end is in sight. Stay tuned.
Best regards,
Martin Eberhard
Co-founder and President of Technology
Tesla Motors