SpaceX’s Elon Musk Warns Of Bankruptcy Risk Over Engine Issue

SpaceX CEO Elon Musk sounded an anxious alarm to all staff at the space transportation specialist, over production problems with a new rocket engine.

On Black Friday, Musk sent an anxious email to his company’s workforce, urging them to work over the weekend on SpaceX’s Raptor engine line.

The huge Raptor engine powers the firm’s Starship vehicle, and has twice the thrust of Merlin 1D engine that is used on the Falcon 9 and Falcon Heavy launch vehicles.

Raptor engine production

This means the Raptor engine is an incredibly big deal to SpaceX, as it will be used to help in the deployment of the Starlink satellite constellation, space exploration, lunar landings, and eventual colonisation of Mars.

But CNBC reported on an email Musk sent to staff, describing the production situation as a “crisis” as well as a “disaster.”

Musk in his email warned SpaceX faces a “genuine risk of bankruptcy” if production doesn’t increase to support a high flight rate of the company’s new Starship rocket next year.

SpaceX is currently developing and testing Starship prototypes at its test site in Boca Chica, Texas, but it has yet to launch the vehicle to orbit.

The first orbital launch of Starship is expected in either January or February of 2022.

But in order to transition to orbital testing, the rocket prototypes will need as many as 39 Raptor engines each – necessitating a sharp increase in engine production.

In the email Musk claimed that after key senior management departed the company, SpaceX personnel had looked deeper into issues surrounding Raptor production and found them to “be far more severe than was reported.”

Two vice presidents, one of whom worked on Raptor engine development, recently left the company, CNBC reported.

Musk letter

“Unfortunately, the Raptor production crisis is much worse than it seemed a few weeks ago,” Musk wrote last Friday. “As we have dug into the issues following exiting prior senior management, they have unfortunately turned out to be far more severe than was reported. There is no way to sugarcoat this.”

“I was going to take this weekend off, as my first weekend off in a long time, but instead I will be on the Raptor line all night and through the weekend,” he added. “Unless you have critical family matters or cannot physically return to Hawthorne, we need all hands on deck to recover from what is, quite frankly, a disaster.”

“The consequences for SpaceX if we can’t get enough reliable Raptors made is that we then can’t fly Starship, which means we then can’t fly Starlink Satellite V2 (Falcon has neither the volume *nor* the mass to orbit needed for satellite V2). Satellite V1 by itself is financially weak, whereas V2 is strong.”

“In addition, we are spooling up terminal production to several million units per year, which will consume massive capital, assuming that satellite V2 will be on orbit to handle the bandwidth demand,” he added. “These terminals will be useless otherwise.”

As an explanation, the first generation of Starlink satellites are known as Version 1 or V1, and don’t include lasers allowing them to communicate with one another. When SpaceX does launch its Version 2 or V2 satellites, they will be much bigger and include laser communication.

In his email therefore, Musk says that Starship is the only rocket that can launch these larger satellites.

Bankruptcy risk

Musk then issued his bankruptcy warning.

“What it comes down to is that we face genuine risk of bankruptcy if we cannot achieve a Starship flight rate of at least once every two weeks next year,” he added.

When his email began to gain press coverage, he provided an update on Twitter, saying that bankruptcy is unlikely, but not impossible, if a severe global recession hits.

“If a severe global recession were to dry up capital availability / liquidity while SpaceX was losing billions on Starlink & Starship, then bankruptcy, while still unlikely, is not impossible,” he tweeted “GM & Chrysler went BK last recession.”

He added a saying by Andrew Grove, that “only the paranoid survive.”

Tesla bankruptcy

This is not the first time that Musk has spoken about bankruptcy, in an effort to get staff to work longer hours or encourage greater efforts.

In November 2020, Musk admitted on Twitter that the period leading up to the launch of the Model 3 (in July 2017), finances at the firm were under severe strain.

Indeed, so much so that Musk admitted that Tesla came within “a month” of bankruptcy in the lead up to the mass production of the Model 3.

Since then, Tesla has become the world’s most valuable car maker, and recently surpassed a $1 trillion valuation.