New Tesla Trouble: a Leaked Memo

Cash-strapped company is asking parts suppliers for money back
By John Johnson,  Newser Staff
Posted Jul 23, 2018 12:45 PM CDT
New Tesla Trouble: a Leaked Memo
Tesla CEO Elon Musk.   (AP Photo/Kiichiro Sato, File)

Tesla's stock was dropping Monday, but this time it had nothing to do with a controversial tweet from CEO Elon Musk. Instead, the Wall Street Journal got its hands on a memo that suggests the company's cash troubles remain significant. In the memo, sent by an unnamed global supply manager to an unnamed parts supplier, Tesla asks for money back on deals struck as far back as 2016. The pitch is that Tesla needs the cash to become profitable and that the supplier should see the give-back as an investment in a long-term partnership. The memo says other suppliers were getting the same message. The Journal notes that while it's not unusual for car companies to seek discounts, it is unusual to seek a discount on past deals.

"This is troubling for us to hear," a Morningstar analyst wrote in a note to clients, per the Guardian. Shares in the company dropped about 5% after the story broke. Tesla confirmed it was seeking price cuts on old deals but said it was a standard business practice. Not everyone agrees. "It's simply ludicrous and it just shows that Tesla is desperate right now," a manufacturing consultant tells the Journal. "They're worried about their profitability but they don't care about their suppliers' profitability." Tesla hit a manufacturing milestone on the Model 3 earlier this month, prompting Musk to say it had "become a real car company." But Tesla is burning through about $1 billion in cash per quarter, and the San Jose Mercury News notes that it just slashed 9% of its workforce to cut costs. (More Tesla stories.)

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