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American automakers have been financially whiffly-waffly for as long as I've been alive. It wouldn't surprise me one bit if this is industry standard for that

by a-dub 8y ago

American automakers have been financially whiffly-waffly for as long as I've been alive. It wouldn't surprise me one bit if this is industry standard for that industry. It also would be pretty smart to play that game given the bad press if it's possible by past precedent regardless of financial condition. It's also quite lucrative to publish these sorts of things about an industry darling with whiffs of smoke coming from a part of the world that gave us Theranos. So it could be good business on the part of Tesla. Or good business on the part of WSJ. Tesla could also be fucked. We shall see...

rjdagost 8y ago
I used to work in the automotive industry. It is common to push suppliers for price reductions on existing and future agreements. But I have never heard of partial refunds on past sales. This is not a smart game of chicken to play. If your suppliers don't think you are able to meet your obligations, they will rapidly cut you off from all credit (if not stop doing business with you all together). And if suppliers require upfront cash for parts deliveries then Tesla is in big trouble due to their high negative cashflow. Also, a move like this could trigger additional credit downgrades. Institutional investors (the main holders of Tesla stock) are much more likely to dump the stock if ratings agencies further downgrade Tesla's creditworthiness. I'd be surprised if Tesla were bluffing here- I think this is either pure desperation or "fake news".
- Animats 8y ago
  It is common to push suppliers for price reductions on existing and future agreements. But I have never heard of partial refunds on past sales. Yes. The terms under which "New GM" took over the supplier contracts of "Old GM" come close. But that was a bankruptcy; the stockholders lost everything and the management lost their jobs. Tesla doesn't buy enough to bully many suppliers like that. If you sell Tesla bolts or tires or coils of aluminum, Tesla is a minor part of your business. Only if your business is making some custom part for Tesla can this work. Tesla does much of their custom stuff in-house, so there probably aren't many suppliers whose main customer is Tesla.
- greglindahl 8y ago
  You're reading a lot into the article that isn't necessarily there. The WSJ didn't confirm that it knew of more than one supplier that was contacted, and Tesla's comment: > But it confirmed it is seeking price reductions from suppliers for projects, some of which date back to 2016, and some of which final acceptance many not yet have occurred. is quite ambiguous -- was that really a partial refund on past sales of parts for production cars? Or was it arm twisting related to failed or incomplete "projects"? I don't know the answer, and I see a lot of people in this discussion being pretty enthusiastic about thinking they do know.
- baybal2 8y ago
  >But I have never heard of partial refunds on past sales. Explanation: "give us money or we will fail upon you"
_Codemonkeyism 8y ago
"It wouldn't surprise me one bit if this is industry standard for that industry." It's not.
Mc_Big_G 8y ago
I used to work for Champion Spark Plug 20 years ago. Chrysler asked us for price reductions every quarter. It got to the point where the engineer assigned to Chrysler hung up the phone one day and said "Fuck it. I'm just going to tell them to get bent because we're already selling them sparkplugs at a loss. What's the worst that could happen? We go out of business? They're already forcing that situation."

by a-dub 8y ago

rjdagost 8y ago

I used to work in the automotive industry. It is common to push suppliers for price reductions on existing and future agreements. But I have never heard of partial refunds on past sales. This is not a smart game of chicken to play. If your suppliers don't think you are able to meet your obligations, they will rapidly cut you off from all credit (if not stop doing business with you all together). And if suppliers require upfront cash for parts deliveries then Tesla is in big trouble due to their high negative cashflow. Also, a move like this could trigger additional credit downgrades. Institutional investors (the main holders of Tesla stock) are much more likely to dump the stock if ratings agencies further downgrade Tesla's creditworthiness. I'd be surprised if Tesla were bluffing here- I think this is either pure desperation or "fake news".

Animats 8y ago
It is common to push suppliers for price reductions on existing and future agreements. But I have never heard of partial refunds on past sales. Yes. The terms under which "New GM" took over the supplier contracts of "Old GM" come close. But that was a bankruptcy; the stockholders lost everything and the management lost their jobs. Tesla doesn't buy enough to bully many suppliers like that. If you sell Tesla bolts or tires or coils of aluminum, Tesla is a minor part of your business. Only if your business is making some custom part for Tesla can this work. Tesla does much of their custom stuff in-house, so there probably aren't many suppliers whose main customer is Tesla.
greglindahl 8y ago
You're reading a lot into the article that isn't necessarily there. The WSJ didn't confirm that it knew of more than one supplier that was contacted, and Tesla's comment: > But it confirmed it is seeking price reductions from suppliers for projects, some of which date back to 2016, and some of which final acceptance many not yet have occurred. is quite ambiguous -- was that really a partial refund on past sales of parts for production cars? Or was it arm twisting related to failed or incomplete "projects"? I don't know the answer, and I see a lot of people in this discussion being pretty enthusiastic about thinking they do know.
baybal2 8y ago
>But I have never heard of partial refunds on past sales. Explanation: "give us money or we will fail upon you"

_Codemonkeyism 8y ago

"It wouldn't surprise me one bit if this is industry standard for that industry." It's not.

Mc_Big_G 8y ago

I used to work for Champion Spark Plug 20 years ago. Chrysler asked us for price reductions every quarter. It got to the point where the engineer assigned to Chrysler hung up the phone one day and said "Fuck it. I'm just going to tell them to get bent because we're already selling them sparkplugs at a loss. What's the worst that could happen? We go out of business? They're already forcing that situation."