From WSJ: Tesla asking suppliers for refund/cash to become profitable

[SoCalGuy]

Saw this today. I must say, I am curious what Elon's response is to this - if it's true, I wonder what's really going on with Tesla's cash management and planning :/

Tesla Asks Suppliers for Cash Back to Help Turn a Profit

Tesla Inc. TSLA -2.08% has asked some suppliers to refund a portion of what the electric-car company has spent previously, an appeal that reflects the auto maker’s urgency to sustain operations during a critical production period.

moderator note: edited out full text to comply with fair use policy.

 

[TurnFast]

It seems like more short seller FUD. If Tesla was really in trouble they would stop funding development of future projects like roadster, semi, model Y etc to focus on the products they do have working now.

 

[PoitNarf]

I’ll wait until the quarterly call on August 1st before I start getting all concerned about potential FUD articles like this. I’m sure this will be one of the things asked about on the call.

Also @SoCalGuy whats with the freakin huge font for the quoted article text? Not all of us need reading glasses

 

[kengchang]

So GM, FCA, Nissan, Toyota, Honda don't negotiate pricing? That's news to me.

 

[TexasTeslaRacing]

Refunding cash doesn’t have an affect on a profit and loss statement, however it does help the balance sheet and if true, it’s immaterial.

 

[ulrichw]

So GM, FCA, Nissan, Toyota, Honda don't negotiate pricing? That's news to me.

The thing that's called out as unusual is asking for retroactive refunds. It's not too surprising to me that they're being a little unconventional, because I think Elon's trying to pull a rabbit out of a hat in terms of showing a positive cash flow this quarter. Retroactive refunds would probably even let them add the money to their GAAP bottom line - i.e, might possibly let them show an actual GAAP profit for the quarter.

I'm guessing that some sort of concession was also offered by Tesla in exchange for this, but since the details of the memo weren't relayed, it's anybody's guess as to what that might have been.

I will say that the vehemence of the protest by the consultant is a little theatrical: “It’s simply ludicrous and it just shows that Tesla is desperate right now,” he said. “They’re worried about their profitability but they don’t care about their suppliers’ profitability.”

Since when is it a company's job to be concerned about their suppliers' profitability? Sure, you want stable suppliers, but it's up to them to negotiate a deal that makes business sense. Their profitability is their own concern - if they can't make money on the Tesla contract, they should look elsewhere.

 

[kengchang]

The thing that's called out as unusual is asking for retroactive refunds. It's not too surprising to me that they're being a little unconventional, because I think Elon's trying to pull a rabbit out of a hat in terms of showing a positive cash flow this quarter. Retroactive refunds would probably even let them add the money to their GAAP bottom line - i.e, might possibly let them show an actual GAAP profit for the quarter.

Tesla employees say Model 3 parts need substantial rework after production

Remember the early report of bunch of parts required re-work? Asking for refund on those parts re-worked part makes total sense.

 

[heems]

Reality: Have you ever returned something you bought? You can get store credit (future purchase discount) or cash back. Tesla asked for the latter.

Fudsters: The house is burning down!!

 

[talkingevs]

Although I'll wait and see the response....I'm not going to lie, it has me slightly worried.

 

[bhzmark]

The thing that's called out as unusual is asking for retroactive refunds. It's not too surprising to me that they're being a little unconventional, because I think Elon's trying to pull a rabbit out of a hat in terms of showing a positive cash flow this quarter. Retroactive refunds would probably even let them add the money to their GAAP bottom line - i.e, might possibly let them show an actual GAAP profit for the quarter.

I'm guessing that some sort of concession was also offered by Tesla in exchange for this, but since the details of the memo weren't relayed, it's anybody's guess as to what that might have been.

Give us money during 2H18 and we will give you more business (higher prices?) in 2019.

Seems worth asking, and a million dollars here, a million there, and pretty soon you are talking real cash flow.

They probably should have done it by phone though.

We all know that showing GAAP profit and + cash flow in 2H18 is a little artificial -- it is only to tee up a capital raise in 2019 for GF3-4 and semi and Y. So slightly contrived ways of showing something that itself is contrived isn't surprising.

prolly shld be disclosed as some kind of nonrecurring item

And I agree -- whichever supplier shipped the early gear shifts with messed up labels should give a refund. I think some of the early screens and early MCUs were off?

 

[dw4ngg]

Refunding cash doesn’t have an affect on a profit and loss statement, however it does help the balance sheet and if true, it’s immaterial.

Ty for bringing accounting logic. I don’t see how this improves profitability in current quarter as cash refund for prior expenses would just reduce losses in prior quarters. If they negotiate current costs, then yes. But that is not what the articles are saying.

 

[beachbum77]

Ty for bringing accounting logic. I don’t see how this improves profitability in current quarter as cash refund for prior expenses would just reduce losses in prior quarters. If they negotiate current costs, then yes. But that is not what the articles are saying.

You are correct. Any cash sent back would only affect the cash balance in Q3. The reduction in costs would have to be applied as adjustments to the quarters in which it was paid. So whoever wrote this memo to the suppliers either was clueless on accounting or hitting a profit is not the real purpose for the money. It is just a bad cover story for "help, we need cash now".

Unfortunately for most suppliers, there is no money to give back a "rebate". With how late Tesla has been paying its bills my guess is most have sold their invoices to factoring firms. They are not about to give any money back. It might actually push them to stop buying Tesla invoices. THAT could be a disaster.

 

[dw4ngg]

You are correct. Any cash sent back would only affect the cash balance in Q3. The reduction in costs would have to be applied as adjustments to the quarters in which it was paid. So whoever wrote this memo to the suppliers either was clueless on accounting or hitting a profit is not the real purpose for the money. It is just a bad cover story for "help, we need cash now".

Unfortunately for most suppliers, there is no money to give back a "rebate". With how late Tesla has been paying its bills my guess is most have sold their invoices to factoring firms. They are not about to give any money back. It might actually push them to stop buying Tesla invoices. THAT could be a disaster.

Plus it’s a hit piece, so it makes sense from that perspective.

Good thing I have short term puts for the short fight of the century going on right now. This is their most pivotal time so I think they’ll have a few small battle victories. Long and strong for the long term though!!

 

[generalenthu]

Remember, Tesla just announced a 37.5 Million donation to Nevada 2 days ago. Signs of a company going Bankwupt.

https://www.usnews.com/news/best-st...onate-a-total-of-375m-for-education-in-nevada

 

[dw4ngg]

Remember, Tesla just announced a 37.5 Million donation to Nevada 2 days ago. Signs of a company going Bankwupt.

https://www.usnews.com/news/best-st...onate-a-total-of-375m-for-education-in-nevada

They’re going to ask for those donations back later when they want to increase profitability in those future periods... I hope Nevada knows this....

 

[beachbum77]

Plus it’s a hit piece, so it makes sense from that perspective.

Good thing I have short term puts for the short fight of the century going on right now. This is their most pivotal time so I think they’ll have a few small battle victories. Long and strong for the long term though!!

Tesla comfirmed they are indeed asking for cash back for projects dating as far back as 2016. So what part of this is a "hit" piece?
Tesla Asks Suppliers for Cash Back to Help Turn a Profit

 

[beachbum77]

Remember, Tesla just announced a 37.5 Million donation to Nevada 2 days ago. Signs of a company going Bankwupt.

https://www.usnews.com/news/best-st...onate-a-total-of-375m-for-education-in-nevada

No word when the $1.5 million grant will be issued. The other $36 million is over 5 yrs... Sometimes you need to read the article too in order to get the full picture.

 

[dw4ngg]

Tesla comfirmed they are indeed asking for cash back for projects dating as far back as 2016. So what part of this is a "hit" piece?
Tesla Asks Suppliers for Cash Back to Help Turn a Profit

Sorry have to spell out for shorts.... the wording implies hit piece... specifically “to help turn a profit”

That’s false. Read posts above. Kthx. Next dumb question warrants a block.

 

[mmd]

I’ll wait until the quarterly call on August 1st before I start getting all concerned about potential FUD articles like this. I’m sure this will be one of the things asked about on the call.

Also @SoCalGuy whats with the freakin huge font for the quoted article text? Not all of us need reading glasses

Ha! Make sure the Youtuber guy reads and understands the article, and the accounts before then
Or we'll just hear more of Elon's Mars plans. Boring and boneheaded questions are not cool.

 

[Barklikeadog]

Tesla Asks Suppliers for Cash Back to Help Turn a Profit
Tesla Inc. has asked some suppliers to refund a portion of what the electric-car company has spent previously, an appeal that reflects the auto maker’s urgency to sustain operations during a critical production period.

The Silicon Valley electric-car company said it is asking its suppliers for cash back to help it become profitable, according to a memo reviewed by The Wall Street Journal that was sent to a supplier last week. Tesla requested the supplier return what it calls a meaningful amount of money of its payments since 2016, according to the memo.

While Tesla said in the memo that all suppliers were being asked to help it become profitable, it is unclear how many were asked for a discount on contracted spending amounts retroactively.

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I know I know, stock shorts, unfair media, everyone is out to get us...