Some of the older Simulink releases were not able to handle spaces or non-ASCII characters in directory names or file names. Sometimes the problem was in third-party tools.
The easiest way to handle this is to create a new (series of) directories from the top of a drive filesystem, with no spaces or non-ASCII characters in the names, and to copy the models into there, and to build there.
Sometimes, though, you also ended up needing to install the tools themselves into safe directory names.
I think the last couple of releases have caught the majority of the problems. It would, however, not surprise me if some of the toolkits for something like Xilinx are not completely safe.
The problem has to do with the tools blindly substituting in full filenames (with directories) into scripts without putting double-quotes (") around the names. For example
would fail if %DESTINATION% had a space in it; a safe tool would have used