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I'm having a really tough time following this article. what are they actually alleging here? What is a "goodwill repair"?

mdoms 6y ago
I agree, this article was extremely hard to follow.
- camjohnson26 6y ago
  From the article: “Cars without issues repaired under warranty don't need to be reported to the NHTSA – National Highway Traffic Safety Administration. After all, warranty repairs are due to manufacturing issues and are, therefore, an OEM's responsibility. Goodwill fixes are something automakers do to please their clients.” Seems like if they classify a repair as goodwill they can avoid a car receiving a lemon designation. There’s also a link to an article that alleges Tesla classifies warranty expenses as goodwill in order to lower their warranty accruals per vehicle, boosting profit margins.
hwillis 6y ago
> Before these experts gave us the lemon laundering perspective, though, the most likely explanation for the goodwill repairs was an article written by Montana Skeptic, a famous Tesla short-seller. He claims that labeling warranty repairs as "goodwill" is a way Tesla found to cheat its financial results. > This would happen because warranty costs are included in financial results as "Cost of Revenue," a number that affects gross profit and net income, according to that article. Instead of naming them as such, Tesla would say they are goodwill repairs, so these expenses would appear as "Operating Expenses," which get diluted in the company's results for as long as the car is under warranty. > If a company labels a warranty repair as goodwill, it may claim in court that it was not due to a defect, but rather to the way the clients used their cars. In short, it could not be framed as something the automaker had to fix, according to lemon laws.
- to11mtm 6y ago
  Sadly nothing new in the auto industry. If it's not for the sake of the financials, it's often done in the name of brand image or to avoid a larger recall. Tacoma frame rot comes to mind here...
stefan_ 6y ago
A goodwill repair is something the manufacturer decides to repair even though they aren't obligated to. It counts as opex instead of cost of revenue like a warranty repair. It might also not count towards repair attempts for lemon laws. The article alleges that Tesla is repairing issues that are covered under warranty as "goodwill repairs" instead to help the balance sheet and circumvent lemon laws. As an owner, you might not care too much since the issue is getting repaired either way.
lilyball 6y ago
A goodwill repair is a repair done not because the issue is covered under warranty, but because the manufacturer wants to make the client happy. This could be because the item being repaired isn’t under warranty anymore, or because the repair is for something other than a manufacturing defect. The article is saying that Tesla is doing a lot of “goodwill repairs” that are likely actually for defects that would otherwise be classified as warranty repairs. It seems to be arguing that Tesla is doing this to avoid having the cars be classified as lemons, though it admits that another motivation for doing so is to adjust their financial reports as it changes how the cost spent for the repair is classified.
- mlyle 6y ago
  There are also (sketchy) accounting reasons to do this-- you don't need to draw upon warranty reserve accounts. The whole reason these accounts exist is to accurately capture the cost of the future warranty obligations at time of sale.
deleted 6y ago
[deleted]
blablablub 6y ago
A goodwill repair is a repair on a car which is still in the warranty period, but the broken part is not covered by the warranty. - so there is nothing charged to the customer. There is also a "goodwill" on the P&L of a company, which has nothing to to with warranties. Some people claim now that Tesla is booking the costs of the these reapairs into the "goodwill" category on the P&L, because both have the same name. It is about an as misleading claim as it sounds.
- perl4ever 6y ago
  >Tesla is booking the costs of the these reapairs into the "goodwill" category on the P&L I think you are incorrect. This appears to have nothing to do with accounting goodwill, and unfortunately the article doesn't make that clear.
josefx 6y ago
A "goodwill repair" is a repair where Tesla asserts that it is an issue caused by the user and not a warranty case. That Tesla is covering the costs of fixing it is merely a matter of goodwill instead. The article alleges that Tesla wrongly handles most warranty cases as goodwill repairs. This hits a lot of possible legal issues. * They can avoid legislation dealing with chronic defects in cars. * They can sidestep reporting requirements for road safety issues. * They can fudge the books when they report repair costs. * They can avoid labeling cars they had to buy back appropriately.
- jbob2000 6y ago
  I think the intent behind the goodwill repair is important. If Tesla is doing this intentionally as a legal loophole, then there’s a problem. But electric cars are new, we’re still understanding some of the problems with them, and we’re still understanding how people are using them. It’s not unreasonable for Tesla to have a high rate for these repairs given how unique their product is.
  - breakingcups 6y ago
    The article points out that Tesla seems to only perform these goodwill repairs when the car is still under warranty, but I have no idea how well-sourced that is.
  - hellisothers 6y ago
    The first sentence makes to a of sense but the second one seems unrelated to any of the discussion. Let’s say the rate is high because of how unique their product is, how does that change anything? The repairs should still be recorded correctly (not goodwill) and laws followed accordingly?
    - jbob2000 6y ago
      The lemon laws were written for the combustion engine days, where hundreds of mechanical components can reasonably add up to an unfixable lemon. A defunct battery can be swapped. A bad electric motor can be swapped. Sensors can be changed. These are trivial to do on an electric car. There’s an incredible labour cost to do this kind of swapping on a combusting engine. An engine swap? That takes a highly experienced mechanic for an ICU. Transmission issues are also write offs. The bar for an electric lemon is much higher.

mdoms 6y ago

I agree, this article was extremely hard to follow.

camjohnson26 6y ago
From the article: “Cars without issues repaired under warranty don't need to be reported to the NHTSA – National Highway Traffic Safety Administration. After all, warranty repairs are due to manufacturing issues and are, therefore, an OEM's responsibility. Goodwill fixes are something automakers do to please their clients.” Seems like if they classify a repair as goodwill they can avoid a car receiving a lemon designation. There’s also a link to an article that alleges Tesla classifies warranty expenses as goodwill in order to lower their warranty accruals per vehicle, boosting profit margins.

hwillis 6y ago

> Before these experts gave us the lemon laundering perspective, though, the most likely explanation for the goodwill repairs was an article written by Montana Skeptic, a famous Tesla short-seller. He claims that labeling warranty repairs as "goodwill" is a way Tesla found to cheat its financial results. > This would happen because warranty costs are included in financial results as "Cost of Revenue," a number that affects gross profit and net income, according to that article. Instead of naming them as such, Tesla would say they are goodwill repairs, so these expenses would appear as "Operating Expenses," which get diluted in the company's results for as long as the car is under warranty. > If a company labels a warranty repair as goodwill, it may claim in court that it was not due to a defect, but rather to the way the clients used their cars. In short, it could not be framed as something the automaker had to fix, according to lemon laws.

to11mtm 6y ago
Sadly nothing new in the auto industry. If it's not for the sake of the financials, it's often done in the name of brand image or to avoid a larger recall. Tacoma frame rot comes to mind here...

stefan_ 6y ago

A goodwill repair is something the manufacturer decides to repair even though they aren't obligated to. It counts as opex instead of cost of revenue like a warranty repair. It might also not count towards repair attempts for lemon laws. The article alleges that Tesla is repairing issues that are covered under warranty as "goodwill repairs" instead to help the balance sheet and circumvent lemon laws. As an owner, you might not care too much since the issue is getting repaired either way.

lilyball 6y ago

A goodwill repair is a repair done not because the issue is covered under warranty, but because the manufacturer wants to make the client happy. This could be because the item being repaired isn’t under warranty anymore, or because the repair is for something other than a manufacturing defect. The article is saying that Tesla is doing a lot of “goodwill repairs” that are likely actually for defects that would otherwise be classified as warranty repairs. It seems to be arguing that Tesla is doing this to avoid having the cars be classified as lemons, though it admits that another motivation for doing so is to adjust their financial reports as it changes how the cost spent for the repair is classified.

mlyle 6y ago
There are also (sketchy) accounting reasons to do this-- you don't need to draw upon warranty reserve accounts. The whole reason these accounts exist is to accurately capture the cost of the future warranty obligations at time of sale.

deleted 6y ago

[deleted]

blablablub 6y ago

A goodwill repair is a repair on a car which is still in the warranty period, but the broken part is not covered by the warranty. - so there is nothing charged to the customer. There is also a "goodwill" on the P&L of a company, which has nothing to to with warranties. Some people claim now that Tesla is booking the costs of the these reapairs into the "goodwill" category on the P&L, because both have the same name. It is about an as misleading claim as it sounds.

perl4ever 6y ago
>Tesla is booking the costs of the these reapairs into the "goodwill" category on the P&L I think you are incorrect. This appears to have nothing to do with accounting goodwill, and unfortunately the article doesn't make that clear.

josefx 6y ago

A "goodwill repair" is a repair where Tesla asserts that it is an issue caused by the user and not a warranty case. That Tesla is covering the costs of fixing it is merely a matter of goodwill instead. The article alleges that Tesla wrongly handles most warranty cases as goodwill repairs. This hits a lot of possible legal issues. * They can avoid legislation dealing with chronic defects in cars. * They can sidestep reporting requirements for road safety issues. * They can fudge the books when they report repair costs. * They can avoid labeling cars they had to buy back appropriately.

jbob2000 6y ago
I think the intent behind the goodwill repair is important. If Tesla is doing this intentionally as a legal loophole, then there’s a problem. But electric cars are new, we’re still understanding some of the problems with them, and we’re still understanding how people are using them. It’s not unreasonable for Tesla to have a high rate for these repairs given how unique their product is.
- breakingcups 6y ago
  The article points out that Tesla seems to only perform these goodwill repairs when the car is still under warranty, but I have no idea how well-sourced that is.
- hellisothers 6y ago
  The first sentence makes to a of sense but the second one seems unrelated to any of the discussion. Let’s say the rate is high because of how unique their product is, how does that change anything? The repairs should still be recorded correctly (not goodwill) and laws followed accordingly?
  - jbob2000 6y ago
    The lemon laws were written for the combustion engine days, where hundreds of mechanical components can reasonably add up to an unfixable lemon. A defunct battery can be swapped. A bad electric motor can be swapped. Sensors can be changed. These are trivial to do on an electric car. There’s an incredible labour cost to do this kind of swapping on a combusting engine. An engine swap? That takes a highly experienced mechanic for an ICU. Transmission issues are also write offs. The bar for an electric lemon is much higher.