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Yeah, it is cheaper than stopping the world. It is much more expensive than not making the mistake in the first place. So much so that I would guess that Tesla

Yeah, it is cheaper than stopping the world. It is much more expensive than not making the mistake in the first place. So much so that I would guess that Tesla is losing money on each car that they had to rework. And remember, Tesla had so many production issues that they _did_ have to stop the world and move into a tent of all places.

Klathmon 8y ago
You think Tesla is losing money because of 37 minutes per car that needs rework? Roughly $15 per car of labor? Not making the mistake in the first place isn't possible at this point... Your options here are "stop everything and fix it at the source, burning piles of cash every second it's down" or "hire some workers to spend 37 minutes per car to fix these known issue while you work on solving them at the root". And going with option 1 seems like a fast track to bankruptcy.
- joshuamorton 8y ago
  Do you know how long it takes to build an entire vehicle? If its 60 hours, then 37 minutes probably isn't breaking, but if its 8 hours, then that 37 minutes is 7.5% of a vehicle's construction time. If Tesla is wasting 7.5% of its time fixing defects, its running at at least 7.5% less than peak efficiency, and if margins are less than 7.5%, that does indeed mean that the vehicles are being produced at a loss.
  - Klathmon 8y ago
    I'm sorry but that math makes no sense at all... It's a matter of throughput vs latency. Who cares if it takes an extra 37 minutes per car, if they can maintain the same throughput, it won't matter a single bit (except possibly someone having to wait an extra 37 minutes to get their car...) The extra time spent on manufacturing has as much to do with margins as the delivery truck getting stuck in traffic does. As long as it's not holding anything up, then there isn't an issue. And it sounds to me like this is a temporary solutions while they fix the root cause, which seems like a really goddamn good idea vs just shutting the whole operation down and giving up.
    - Retric 8y ago
      Exactly, it's a question of capital costs vs burn. If you need say 100 million in hardware and 1,000$ in manpower to build a car then spending an extra 100$ in manpower is cheap even * (5,000 * 0.14) = 70k per week. Meanwhile you might be paying 70k per hour the line's stopped. Granted, you don't want to wait a full year to fix a production issue, but you can batch things so you are fixing several parts of the line at the same time. And if one of those batched fixes was not 100% correct but is re-workable then you can wait another few weeks for the next batch of fixes. Conversely, if you where producing 50,000 cars per week then rework costs go up and shutting things down quickly to make a minor fix is more viable.
- Skunkleton 8y ago
  Making up numbers isn't helpful here. TFA says the average is 37 minutes/car. I am not sure where you get the $15 from, but usually manufacturing companies have an internal hourly rate for different stations within the plant. For example, the machine shop at the last company I worked for was ~$400/hour. Further, it is likely that there is also significant material cost associated w/ these reworks. Given that the model 3 is a low cost vehicle, it is probably also pretty low margin (I haven't looked). I would guess that this means that they are selling the model 3 at a loss, especially if you throw in the costs for the recent retooling.
  - Klathmon 8y ago
    I got the $15 from other areas that have said the cost of labor is roughly $30/hr for stuff like this. But regardless, if you really think a 37 minute fix is costing them enough that it means they are selling the car for a loss, then I can see why people are upset by this news, as it means that shutting down the entire plant would make more financial sense than selling at a loss. But since we are both working from a guess of a guess of a guess, I'm fairly certain that an extra 37 minutes per car of work isn't eating over 100% of their profits, and that their choice of not stopping production over small fixable issues is a smart choice. And even if it were, i'd argue that keeping your workforce from getting other jobs because they can't get work at your company while you endlessly tinker with the production lines to try and achieve what only a few companies in existence have done before (almost 100% FPY) isn't good business sense either... But then you want to throw in the cost of tooling changes, and now this conversation isn't against the cost of a car, but the entire cashflow of the business, which if you are curious you can lookup. They aren't turning a profit, and nobody thinks they are yet. But if people are holding them to the ability to get everything right on the very first try and the second there is an issue to shut down again, then they are going to be disappointed regardless.
    - Skunkleton 8y ago
      The industry as a whole tries to avoid rework as much as possible, but you are saying that a 20% FPY is fine, and it only costs $30/ vehicle anyway. I am not saying that I know much about the specifics of Tesla's finances, but I can say that you are missing the big picture here.

Klathmon 8y ago

You think Tesla is losing money because of 37 minutes per car that needs rework? Roughly $15 per car of labor? Not making the mistake in the first place isn't possible at this point... Your options here are "stop everything and fix it at the source, burning piles of cash every second it's down" or "hire some workers to spend 37 minutes per car to fix these known issue while you work on solving them at the root". And going with option 1 seems like a fast track to bankruptcy.

joshuamorton 8y ago
Do you know how long it takes to build an entire vehicle? If its 60 hours, then 37 minutes probably isn't breaking, but if its 8 hours, then that 37 minutes is 7.5% of a vehicle's construction time. If Tesla is wasting 7.5% of its time fixing defects, its running at at least 7.5% less than peak efficiency, and if margins are less than 7.5%, that does indeed mean that the vehicles are being produced at a loss.
- Klathmon 8y ago
  I'm sorry but that math makes no sense at all... It's a matter of throughput vs latency. Who cares if it takes an extra 37 minutes per car, if they can maintain the same throughput, it won't matter a single bit (except possibly someone having to wait an extra 37 minutes to get their car...) The extra time spent on manufacturing has as much to do with margins as the delivery truck getting stuck in traffic does. As long as it's not holding anything up, then there isn't an issue. And it sounds to me like this is a temporary solutions while they fix the root cause, which seems like a really goddamn good idea vs just shutting the whole operation down and giving up.
  - Retric 8y ago
    Exactly, it's a question of capital costs vs burn. If you need say 100 million in hardware and 1,000$ in manpower to build a car then spending an extra 100$ in manpower is cheap even * (5,000 * 0.14) = 70k per week. Meanwhile you might be paying 70k per hour the line's stopped. Granted, you don't want to wait a full year to fix a production issue, but you can batch things so you are fixing several parts of the line at the same time. And if one of those batched fixes was not 100% correct but is re-workable then you can wait another few weeks for the next batch of fixes. Conversely, if you where producing 50,000 cars per week then rework costs go up and shutting things down quickly to make a minor fix is more viable.
Skunkleton 8y ago
Making up numbers isn't helpful here. TFA says the average is 37 minutes/car. I am not sure where you get the $15 from, but usually manufacturing companies have an internal hourly rate for different stations within the plant. For example, the machine shop at the last company I worked for was ~$400/hour. Further, it is likely that there is also significant material cost associated w/ these reworks. Given that the model 3 is a low cost vehicle, it is probably also pretty low margin (I haven't looked). I would guess that this means that they are selling the model 3 at a loss, especially if you throw in the costs for the recent retooling.
- Klathmon 8y ago
  I got the $15 from other areas that have said the cost of labor is roughly $30/hr for stuff like this. But regardless, if you really think a 37 minute fix is costing them enough that it means they are selling the car for a loss, then I can see why people are upset by this news, as it means that shutting down the entire plant would make more financial sense than selling at a loss. But since we are both working from a guess of a guess of a guess, I'm fairly certain that an extra 37 minutes per car of work isn't eating over 100% of their profits, and that their choice of not stopping production over small fixable issues is a smart choice. And even if it were, i'd argue that keeping your workforce from getting other jobs because they can't get work at your company while you endlessly tinker with the production lines to try and achieve what only a few companies in existence have done before (almost 100% FPY) isn't good business sense either... But then you want to throw in the cost of tooling changes, and now this conversation isn't against the cost of a car, but the entire cashflow of the business, which if you are curious you can lookup. They aren't turning a profit, and nobody thinks they are yet. But if people are holding them to the ability to get everything right on the very first try and the second there is an issue to shut down again, then they are going to be disappointed regardless.
  - Skunkleton 8y ago
    The industry as a whole tries to avoid rework as much as possible, but you are saying that a 20% FPY is fine, and it only costs $30/ vehicle anyway. I am not saying that I know much about the specifics of Tesla's finances, but I can say that you are missing the big picture here.