Steering a Struggling Startup Toward Success

Chris Dawson says he’s always been attracted to big challenges—and he certainly found one when he became CEO of Arcimoto earlier this year. The Oregon-based electric vehicle company was floundering: its worth had plummeted, production was at a halt and the staff was reeling from layoffs. On this episode of the Voices of Experience podcast, Dawson describes his approach to turning around a struggling organization, including his decisions to make deep cuts, and how he regained the trust of those who kept their jobs. Plus, he explains how his leadership style shifted to one of implicit trust and weighs in on the future of the electric vehicle industry.

Show Notes

Chris Dawson

Chris Dawson is the CEO of Arcimoto and graduated from the Daniels College of Business with his Executive MBA in 2015.

1:01 “Right-sized” electric vehicles
3:37 Using “fun” to sell a greener future
8:22 The future of the electric vehicle industry
10:53 Taking the helm at a challenging time
Cutting staff and regaining trust
17:24 Leading with “implicit trust”
21:11 “Decide it is possible. Make it so.”
22:17 Show notes and credits

In this episode:

Global Newswire: Arcimoto Appoints Chris Dawson as Chief Executive Officer
YouTube: Introducing the Arcimoto MUV: the Modular Utility Vehicle
Electrek: Wild 3-wheeled electric vehicle teetering on the brink of bankruptcy. Here’s why
Oregon Public Broadcasting: An Oregon-based company lost millions last year, but its new CEO is hopeful for profits
KLCC: Arcimoto’s new MUV rolled out for Wall Street event

Elektrek.co’s review of the Arcimoto FUV

Transcript

Lorne Fultonberg:
This month, on the Season 3 premiere of the Voices of Experience podcast.

Chris Dawson:
“When the hurricane is blowing, you’ve got to be the eye of the storm.”

Lorne Fultonberg:
Bringing a promising startup back from the brink of collapse.

Chris Dawson:
“You’ve got to be calm, collected, you’ve got to keep a viewpoint on everything that’s occurring.”

Lorne Fultonberg:
Chris Dawson willfully stepped into the storm this spring when he took the helm at Arcimoto, an Oregon-based company that makes multi-purpose, three-wheeled electric vehicles. On this episode, he talks about the big decisions he made to steer things in the right direction, including why he made deep staffing cuts, and what it’s taken to regain the faith of those who kept their jobs. Chris is also a graduate of the Daniels Executive MBA program, where he learned to change his leadership style from “keep up or get out” to one of implicit trust.

Lorne Fultonberg:
Chris, thank you so much for being here.

Chris Dawson:
Lorne, it’s good to be here.

Lorne Fultonberg:
Arcimoto’s whole deal is making right-sized, ultra-efficient electric vehicles for moving people and stuff. I’m curious, first of all, what it means to be right-sized?

Chris Dawson:
Yeah, so when we really start talking about sustainable transportation, there’s this intellectually honest conversation that most especially electric vehicle manufacturers don’t really want to get into. And it’s around, what is the total amount of battery I need and rare earths that I need in the motor and material for the structure, and how much space I’m literally taking up, therefore, how much road is required to support. And so there’s so many things when we start talking about sustainable transportation. What’s right sized? How do you really define that? How we defined it is by looking at the data, and 90% of all drives have one or two people, minimal cargo. Average trip length is three miles and average daily travel is 35 miles.

What we really pulled away from that is, do you really need a 6,000 pound SUV to go get your latte? Do I need a big diesel box truck to deliver my toothbrush? So with that, we can provide much smaller right-sized vehicles that are much more efficient. Right now the FUV is three times more efficient than a Tesla, right? Yeah, a Tesla is a great electric vehicle, but I can get the same around of get around with a third of the energy cost. And what are the one thing that’s increasing more than most things these days is energy costs, whether it’s fossil fuel or electrons.

Lorne Fultonberg:
And you said FUV, which stands for Fun Utility Vehicle, is that right?

Chris Dawson:
Yep, Fun Utility Vehicle, because it is also that. So yes, it absolutely has got a fair bit of utility. It solves 90% of all the drives that you’re going to need in a given day. When I’m up in Eugene, Oregon where we’re based, that’s all I drive around. I take it to the gym, to the grocery store, out to eat, pick up the girlfriend. We’ve also got accessories for dogs. I can load the dogs in there and drive around, so it facilitates everything that I need for mobility. It goes 80 miles an hour so I can take it on the highway. It’s good for side streets.

We have customers that will literally take it from the garage where they charged it up on a 110 outlet. You don’t need special charging. Load up their golf bags into that golf bag accessory, drive it to the golf course, use it as the golf cart, because it’s small enough and light enough to operate on a golf course. Play 18 holes, hop on the highway and then go back home, plug it into the 110 outlet. It’s really that right-size vehicle. Everything from the amount of energy it consumes what it takes to charge and what you would do on a given day.

Lorne Fultonberg:
I see the word fun all over your advertising. I hear people describe it as fun. Why did you brand it that way, and what makes it more fun than a regular vehicle?

Chris Dawson:
Yeah, so one, it is an open-air vehicle. We do have a doors option, but it’s open air, so much like power sports, motorcycling, you’re in the environment. they get the two-wheel experience without the two-wheel risk. They get the two-wheel performance without the two-wheel risk, and they’re fully caged in. It’s a very safe platform I can give someone a 30-second rundown before they take off and drive it. And boom, they’re off to the races, they can drive around the block, pick it up on the highway, and people pick it up very quickly. It’s a novel driving experience, which makes it fun. It kind of feels like the perfect beach vehicle or driving around twisty roads in the mountains. But again, with having that stability.

Lorne Fultonberg:
Do you feel like fun is the way to sell a cleaner, greener future?

Chris Dawson:
I do. We all care about the environment. We can all talk and have those conversations. When it comes down to it, every product needs to solve a problem for its customer at a price point that they can afford. Electric vehicles are not doing that today. Electric vehicles chiefly don’t solve any real problems. They cost you more to acquire. They’re less reliable. I need special charging at home, or I have to change my habits when I’m driving around and be able to wait for an hour and a half to as much as four hours to charge it, to charge it somewhere else. All this is creating is more work for the consumer and not really solving the problem. For those people that have been fortunate enough that the problems in their life have been removed such that the environment actually makes it onto that list hierarchy of needs, then sure, that’s solving a problem for those customers, a very small subset.

For us looking at this, it’s a fun vehicle. It’s got a ton of utility, it’s fun to drive. It does everything that you need it to do. And by the way, it’s environmentally friendly and you’re going to reduce your carbon footprint by more so than even a Tesla, right? At three times the level of efficiency. Because that carbon footprint doesn’t just go what comes out the exhaust pipe, but all of the energy expenditure that goes into creating it. We look at a Tesla model S with a 100 kilowatt battery. The FUV has a 19.2 kilowatt battery, so a one-fifth the size of the battery is in that. That’s far less materials that got to come out of the ground, far less energy that goes into refining that and making that into cells and then into packs and then into the vehicle.

And so when we think about right-sized transportation, we’re thinking about it for the full cycle. Everything from the energy required to recycle it to the energy required to build it. And we need to figure out how we use less if we really want to do this right.

Lorne Fultonberg:
The newest product there at Arcimoto is the Modular Utility Vehicle, the MUV, which I’ve heard you describe as the all electric workhorse. It’s intended for hauling materials, supplies and equipment. Why have you decided to focus more of your energy on commercial vehicles right now?

Chris Dawson:
Commercial vehicles make up most of the miles driven. Though they’re not the most vehicles, but they spend the most time on the road and doing the most work. And we look at some of these thicker urban areas like if you’re in New York City, San Francisco, LA, even Downtown Denver has similar problems where you have these large Amazon box trucks or UPS trucks or FedEx taking up space, generally having to throw in the hazards in the middle of the road and blocking up traffic. There’s no place to park them. They spend an entire day, eight to 12 hours idling, just wasting energy, let alone the environmental impact.

You can solve what you’re doing with those bigger box trucks with a few of these and be able to get them in and out, not wasting the energy while they’re sitting. They’re easy to park. They’ll fit into typical motorcycle parking spaces. That coupled with a low acquisition cost and also a simple design, which means it’s far more reliable, maintenance is easy. And you don’t need all this charging infrastructure to support it. When we look at delivery fleets, being able to just purchase this say 20 MUVs, and now I have an entire food delivery service that can be supported with a 110 outlet.

And anybody could get in and drive it. You don’t need a special driver’s license to do it. It’s like I said, motorcycle-type controls, which are very much bicycle type controls. And then we’ve got this nice big box on the back that can load it up with pizzas or packages or whatever kind of delivery piece. We’re getting a lot of interest there for corporate clients, looking at everything from an automated version of that to a driven version of that to move materials around between stores, deliver it to customers. That whole mobility piece, this solves it far more cheaply in acquisition, as well as operation.

Lorne Fultonberg:
As you look at the future of the electric vehicle industry, what element do you think is the most promising? And then what do you think poses the biggest obstacle to success or widespread adoption?

Chris Dawson:
I think micro-mobility is the most interesting piece that I think is really going to cause the massive shift that we want to see/need to see. Kind of like what I alluded to earlier with the right tool for the right job. I see a lot more electric bicycles, a lot more micro-mobility pieces come into market and people realizing how much they actually really need and how encumbered their life is as a result of what we thought we needed before. Where I see a huge limitation and what I see is a cliff that we’re going toward at 1,000 miles an hour is infrastructure and energy storage availability. When we look at the current elements in the ground and the current mining operations that are pulling those from the ground, and then you scale out electric vehicle adoption and all the new vehicles that are coming to market and they’re relative minerals required to develop all of the batteries to support all of those things, there’s a disconnection there.

We’re not pulling enough out of the ground yet to support what we need. And what you’re pulling out of the ground now doesn’t go into a battery next month. What you’re pulling out of the ground now goes into a battery at best next year, if not two years from now after going through the entire process. And mining isn’t necessarily scaling as fast as it needs to support that adoption on one level. And in order to speed that up, we start seeing the artisanal mining and slave labor and all those other aspects and the really unsavory pieces around the sustainability conversation. And so that’s a big piece that I worry about.

And then on the other end is the infrastructure to support it. I’m increasing a massive amount of demand that had never existed before. Most cities don’t have the electrical infrastructure to support any kind of low-level adoption, let alone mass-level adoption that we expect to see. I mean, at the end of the day, I do believe that electric vehicles are a better technology as far as the day-to-day operation. I still think there’s a place for internal combustion. And I think when you start talking like interstate travel, some internal combustion hybrid-type solutions are actually fairly ideal given the infrastructure we have today that allow you to be electric in town and then use internal combustion to go state-to-state, interstate travel. And that’s one way to potentially balance it.

Lorne Fultonberg:
You took over as CEO of Arcimoto a few months ago, and it seems like an interesting time to become CEO of the company. Just a little background for our listeners. A couple of years ago in 2021 the company had a $1 billion evaluation. By the end of 2022 the cash supply was just 450 grand, 200 employees had been laid off and production was shut down for a time there. What made you want to take on a challenge like this, Chris?

Chris Dawson:
Yeah, I seen career-wise have been attracted to the big challenges. I really do like to go slay the dragon. I like to say that my best days are when Rome is burning, and this as you described it sounds very much like that. With Arcimoto, I joined the board in August of 2022. Some of what you described there is some of the things that we are doing from the board level. And so it was me and another board member, Dan Creed, who came 20 plus years of BMW, were able to come in as car guys and say, “Okay, let’s take a look at what’s really going on. Okay, what’s happening? All right, full stop. Do not make another vehicle until we get this figured out.”

And what that really came down to is looking at it on a material and product-level profitability, which we were not at. We’re literally throwing thousands of dollars into the cargo box of our FUV that rolled off the line, so we were paying for the right to continue to lose money. I said, “No, absolutely not. Hit the stop. We got to get this figured before we move forward.” We halted production, pushed that down to the team, and then we started looking at the org chart We went through, we had 12 different capital-intensive projects. Everything from non-rare earth motors, new battery designs, new technologies that we actually can’t wait to bring forward, but we’ve had to shelve until we actually reach a level of profitability.

We also had seven SKUs on the website, only of which three were making any kind of money, and not enough to necessarily scale us into any breakeven. And so we sat down, we took the three that weren’t making money and included one that could reach profitability in the next six months. And we left those on. And those are the four SKUs that you see on the website today.

What I’ve told the team is that once we prove that we can drive profitability and hit target margin on these products, we’ve now earned the right to innovate. And we can go back and pull some of these things off the shelf and say, “Okay, what’s the next thing that we introduced to the market that’s going to have that impact on humanity that we want that also customers are asking for?” Actually give a product to the customer that the customer wants. It solves problems for them at a price point that makes sense for the value that we add and that they can afford.

Lorne Fultonberg:
When Rome is burning, how do you prepare to run in there? What’s your strategy in a situation like this?

Chris Dawson:
And so just bringing in that focus, focusing in on those core areas where we are losing the most on our profitability or we stand the most to gain focusing in there and just taking the hit on the other things that are considerably less important around the business.

And so some really hard decisions had to have been made in that process. So, as you can imagine, taking a 320-person team, distilling it down to 33%, you are left with your best rockstars in that group. And we absolutely cut way too deep, which is when you do these kinds of cuts, you’ve got to cut too deep, otherwise you cut and cut and cut and cut and that just kills morale and culture.

So, what I pushed the team to do is cut way past where they wanted to, made them really uncomfortable. Cut into that, and then they had to make justifications for each and every person that they brought back from that cut list that truly were a rockstar. Here’s the level of value, here’s the ROI on each individual position, it was difficult for the executive team to bring anybody back they’d cut previously. What that means is I’m left with 120 rock stars that I can’t afford to not implicitly trust to do the job. And so then you point the focus and you get the hell out of the way, and you let those rockstars go and bring that home and then you augment from there. That’s, I guess a wordier version of saying, “When the hurricane is blowing, you’ve got to be the eye of the storm.” You’ve got to be calm, collected, you’ve got to keep a viewpoint on everything that’s occurring. And as people go and venture out into the storm and come back, get them reoriented to focus on the very most important parts.

Lorne Fultonberg:
When you’re making these difficult decisions, particularly about workforce, about product, how do you win the trust of employees and investors who have had a front row seat to these struggles?

Chris Dawson:
You’ve got to, one, deliver, right? So for the employees internally, I think they need you to see you deliver on what you say you’re going to deliver on. You also need to be very communicative about what you’re doing and then also deliver on it. So, in these scenarios where Rome is burning, what tends to happen is leadership obscures the truth of the matter from the folks. It’s not in any kind of nefarious, just trying to save them from the stress of the situation. The problem with that is that it builds up to a point and then all of a sudden it’s abundantly clear, but to everybody else it was the cold bucket of water, because they didn’t understand what was going there. And if you leverage that whole team, that whole team will help pull you out. I think being very clear about the intentions, being very clear about where the business is, being very clear where you’re going to take the business, and then actually take it there. Internally with employees, I think I try to remove any obscuration whatsoever. I try to remain completely open. Anybody at any level within the business can ask me any question about the business and I’ll be able to tell them.

And then on the investor side especially we’ve burned a lot of bridges as Arcimoto as an organization with a lot of different investor groups. And so going back and say, “Okay, here’s the actual plan. Here’s the business plan. Here’s the total addressable market. Here’s the total serviceable market. Here’s how we’re going to target it. Here’s the approach. Here are my actual projections of what we’re going to achieve.”

All of these things were missing previously. It was typical startup with painting this beautiful picture of the future and the technology that we’re going to bring forward and the impact that we’re going to have in the world, but not necessarily the nuts and bolts of exactly how we were going to get there.

Lorne Fultonberg:
How would you describe your leadership style, and how has it changed over the course of your career?

Chris Dawson:
I would say my leadership style would be implicit trust, because what I’ve found, for me, starting from the engineer ranks and an individual contributor, I’m responsible for all of my things. There’s not a lot of assistance that goes outside that generally I’m come to for assistance and there’s no one for me to necessarily go to, based on how my career has gone. And then I was given a team, that first initial team of 10 to 12, and I’m now trying to do 12 people’s job. I’m so used to just being very hands-on like, “Ah, just get out of the way. Let me do that. Let me just get this done. It’s going to take me 10 seconds, it’s going to take you 10 years.” And so I was very much that guy ’as I’m leading these teams it was like “keep up or get out” kind of mentality.

And part of that may have come also from a military background where you had a different breed of folks that you see in the military versus what you see in corporate America. And I had really awesome teams with incredibly high turnover and that was almost a badge of courage for a little bit. And it wasn’t until I got my first real promotion within Tesla moving from a 12-person org that I was leading into a 50-person org and I was going to a completely different part of the factory. And so now I have these maintenance techs and robotics engineers at a kind of going away barbecue party thing for me and some of them breaking into tears over it, right? And these are pretty burly dudes and they’re getting very emotional about me leaving. And then I realized in that moment I was always about how many doors I could kick down and show these guys what for, but never thought about the wake I was leaving behind.

That was a really pivotal moment for me understanding that I gave these guys tools that they didn’t necessarily have before just based on my experiences and my own scars and gray hair. And then I set them up for success and this was a team that was underperforming as relative to the others. And then we were able to accelerate them to be at least on par and in some areas exceeding the other shifts. And so with that understanding that the wake you leave behind is far more important than the doors you kicked down, completely shifted the paradigm of how I thought about it. And then my career really started to move. I started to think about how to facilitate everybody else’s ability to add value to where I’ve completely shifted around to where now I like to have a conversation, especially with management and especially with engineers is the first thing I generally say is, “You add no value, I add no value. But that person right there that’s putting the nut on the bolt into the vehicle, he’s the only person that’s actually adding value to the product, or he’s creating that product. The rest of us are just here to amplify that individual’s ability to add value. And we are all on their coattails and our entire job is to make their job easier.”

So, one way to instantly classify what it is that you are doing, if it’s correct or not, does it make your job easier? Okay, great. Does it make their job easier? Yes. Okay, great. The minute you’ve done something that made your job easier and their job harder, we’ve actually transferred the load in the wrong direction.

So I run it more like a sports team in that let’s say football defense, but your middle linebacker can’t also be your cornerback, who also can’t be your nose guard. Each one of those positions has to depend on the other position to do their job every single play. Running a business any other way I think is foolhardy.

Lorne Fultonberg:
The last question we have for you, Chris, is a question we ask all of our guests, which is, as a voice of experience, what is something you would want to pass on to our listeners?

Chris Dawson:
It’s this concept of decide it is possible, make it so, literally every problem is distilled down to that two-step process. I still use it almost on a daily basis of going after particular problems. The stress sets in, your main path is no longer available. What are you going to do? You’re not going to lay down and give up. We already know this thing’s possible. I’ve already decided that. I don’t even have to spend time on that. It’s just figure it out. And so whatever that thing is, that dream, that achievement, the goal, short term, long term, at any given point’s going to feel impossible. And if you decide that it is, then it is. But if you just make the decision before you have to decide, I already know that it’s possible. That’s not even in question. Just make it so.

Lorne Fultonberg:
Chris Dawson is the CEO of Arcimoto and a graduate of the Daniels College of Business executive MBA program. Chris, I really enjoyed our conversation. Thank you.

Chris Dawson:
No, likewise. Look forward to the next one.

Lorne Fultonberg:
Sadly, we did not get a chance to test drive an Arcimoto vehicle, but we did a get a sense of what it feels like through some videos on the company’s YouTube channel. You can find a link on our show notes at daniels.du.edu/voe-podcast. The VOE Podcast is an extension of Voices of Experience, the signature speaker series at the Daniels College of Business, sponsored by U.S. Bank. If you’re new around here, you can check in every month for a new episode. Or make it easy on yourself and hit subscribe.

Sophia Holt is our sound engineer. Joshua Muetzel wrote our theme. I’m Lorne Fultonberg. We’ll catch you again next month.

Show Notes

Table of Contents

In this episode:

Related articles and information:

Elektrek.co’s review of the Arcimoto FUV

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