Tesla wants refunds from suppliers to hit profitability

Fredrick Soto
July 24, 2018

The electric-car maker made the request to fewer than 10 suppliers related to capital expenditures for long-term projects that started as far back as 2016 and aren't complete, a spokesman said in a statement.

The company asked suppliers to refund a meaningful amount of the money it had spent with them since 2016, according to a memo leaked to The Wall Street Journal. Analysts say Tesla needs to sell a lot more cars.

It's not clear how many suppliers were asked to hand back money, with some saying they weren't aware of the request, the newspaper said.

Tesla is due to report second-quarter earnings after the stock market closes on August 1.

Musk, Tesla's co-founder and CEO, confirmed on Twitter that Tesla is asking for money from its suppliers.

Based on the WSJ report, suppliers appear reluctant to compromise their own profitability to buoy Tesla.

The remainder of our discussions with suppliers are entirely focused on future parts price and design or process changes that will help us lower fundamental costs rather than prior period adjustments of capex projects.

Tesla had previously experienced serious production delays on its Model 3, which reportedly also impacted its supplier.

The Tesla logo is seen at the entrance to Tesla Motors' new showroom in Manhattan's Meatpacking District in New York City, U.S., December 14, 2017. Chief Executive Officer Elon Musk has said the company does not need to raise cash this year, but several analysts have predicted that the electric vehicle maker would need to raise capital soon. "It would not be correct to apply historical cost savings to current quarter", tweeted Musk.

Tesla is pushing to improve its financial position as it spends heavily to boost production of its latest auto, the Model 3. "It's simply ludicrous and it just shows that Tesla is desperate right now", Dennis Virag, a manufacturing consultant, told The Wall Street Journal.

In June the company said it was eliminating 3,600 jobs, or 9 percent of its staff, as part of a restructuring effort.

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