This afternoon, a published report once again indicates that suppliers to electric automaker Tesla continue to be concerned about the manufacturer’s ability to pay on-time. Tesla's Announced Job Action
The Wall Street Journal reports (Paid subscription required) that a survey conducted by the Original Equipment Supplier’s Association’s council members, indicated that 18 out of 22 supplier respondents believe that the automaker is now a financial risk for their respective companies.
According to the WSJ report, the survey was conducted in the past few weeks, a period that included the automakers recent Q2 financial performance and CEO Elon Musk’s Twitter posting indicating a plan to take Tesla private. The report clarifies that while the survey population does not represent a vast majority of current suppliers, it does provide an indication of building concerns regarding the automaker’s ability to pay on a timely basis. According to this report, most all of the respondents want to sustain or grow their business with Tesla.
The report does indicate that production direct materials suppliers are being paid at the rate of 95 percent per payment terms, up from 90 percent last year. Sources of the WSJ indicated that suppliers of indirect materials are being paid about 80 percent to target terms.
CEO Musk indicated to the WSJ that any delayed payments relate to whether parts shipped conformed to specifications.
There was also clarification provided to a July report indicating that some suppliers were asked to provide rebates on previous deliveries.  The WSJ now clarifies that capital equipment suppliers were asked for cash-back rebates, as opposed to direct material suppliers. Tesla indicated to the WSJ that such rebates were asked to less than 10 capita-equipment suppliers. However, the recent survey conducted among the OEM Supplier Association membership noted that 13 of 23 respondents indicating that Tesla requested “large” price reductions on current business and/or retroactive rebates. Others indicated requests for extended payment terms.
As of this afternoon, Tesla stock closed in just above the $308 range, after an August high of $375.  CEO Musk is under regulatory scrutiny on his Twitter prior posting indicating a potential deal to take the company private for $420 per share. Musk further complained at the amount of “short sellers” betting on the decline of Tesla’s stock for their own gain.
Last week, in a featured interview with The New York Times, the CEO indicated the “excruciating personal toll” that company has taken on his personal life, and that the experience has been the most painful year in his career. That includes 120-hour work weeks and sleeping over consecutive days at the production assembly plant.
All of these current and ongoing developments are once again raising an awareness that brilliant visionaries and inventors such as Musk, need to rely on experienced leaders to manage day-to-day and week-to-week operational needs including business scalability and supplier relationships.
Automotive suppliers are a tough breed, savvy at supply agreements and sustaining business relationships. Many have been financially burned in prior relationships with automotive OEMs’, while many pin their hopes on aligning with an industry innovator posed for growth. When perceptions begin to turn concerning such goals, there can be a true sense of concern.
The coming weeks may well be a turning point for Tesla in its manufacturing and supply network relationships and ongoing performance. For the sake of all of the automakers employees and stockholders, now may well be the time for bringing in renewed operational leadership.
Bob Ferrari
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