When I copied and pasted the article text, that's just how it appeared upon posting.Also @SoCalGuy whats with the freakin huge font for the quoted article text? Not all of us need reading glasses
You can install our site as a web app on your iOS device by utilizing the Add to Home Screen feature in Safari. Please see this thread for more details on this.
Note: This feature may not be available in some browsers.
When I copied and pasted the article text, that's just how it appeared upon posting.Also @SoCalGuy whats with the freakin huge font for the quoted article text? Not all of us need reading glasses
Elon Musk : Only costs that actually apply to Q3 & beyond will be counted. It would not be correct to apply historical cost savings to current quarter.
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
That could be the right interpretation, but also note that Elon was replying specifically to an Electrek headline only about profitability, not cash flow.Not feeling very good about that clarification from Elon. It implies this move is squarely about the cash balance which (I believe) is one of the major sticking points that prevents the stock price to accumulate on recent good news.
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.
----------------
I know I know, stock shorts, unfair media, everyone is out to get us...
Well, like it or not, cash balance is the risk here. In the absence of a raise, Tesla should do everything they can to improve their cash balance to get through the next few months. They are running it awfully close.Not feeling very good about that clarification from Elon. It implies this move is squarely about the cash balance which (I believe) is one of the major sticking points that prevents the stock price to accumulate on recent good news.
This news looks like it is killing the stock. Maybe investors fear Elon will do anything to try and show a profitable quarter even if it not sustainable.
They Do have About 2 Billion in undrawn liquidity (per Q1 10q) from a credit facility. They pay 0.25% to keep these lines open. and libor + 0.5% when they draw on it.Well, like it or not, cash balance is the risk here. In the absence of a raise, Tesla should do everything they can to improve their cash balance to get through the next few months. They are running it awfully close.
Refunds on historical quarters will just update historical books retroactively - it can’t be counted against the current quarter.
If they however negotiate discounted rates going forward, it can be counted, but that also is more sustainable.
The article title makes it sound as though this is a widespread thing, but it is clear from the text that the WSJ knows of only one supplier affected, even though they contacted others and weren't able to get confirmation anywhere else. There may well be more affected, but there is no evidence in the article to say that it is more than a small number of special cases.
I think the request probably arose either because the supplier was over-charging Tesla in the past, and Tesla only just realized (or didn't have enough leverage to stop it until they achieved higher volume with the recent Model 3 ramp), or maybe the parts were of poor quality in some way, or related to a failed project (e.g. the first battery line at the factory) and Tesla now wants compensation.
Also, the article seems to be implying that Tesla told the supplier that the money was needed so that they can stay in business. This seems unbelievable to me - why would any supplier pay Tesla money if Tesla is warning them that they are essentially on the verge of bankruptcy? The money would just be wasted in that case.
I wonder if the article is instead misrepresenting some boilerplate language like "recouping costs from suppliers to compensate for poor quality is necessary for Tesla's ongoing profitability", i.e. something just intended to convey that Tesla uses good business practice and isn't going to allow a supplier to let them down without needing to pay for it later.
Not accurate. They won't restate prior quarters' expenses if they recapture expenses from prior quarters in the current quarter, as long as the mgt plan and action to recapture expenses from the old quarters occurred in the current quarter. Any benefits from these activities would be a benefit to 3Q cash flow (obviously) and also a benefit to 3Q expenses. That said, I'm hopeful that the activity is primarily related to receiving parts that were not in spec in the first place. Can't screw with your vendors too much or they'll learn to increase prices to build buffer against unknowns.The reduction in costs would have to be applied as adjustments to the quarters in which it was paid.
Indeed, the Q2 financials will be a dumpster fire for sure. That will present an opportunity to buy some stock for those seeking an entry point lately. It'll be the Q3 financials that will tell the tale in terms of whether Model 3 has finally gotten Tesla over the cash burn hump. If not, look out below. I suspect we will see a stock/debt offering during Q3 though, in the range of $2B, and if history is any guide the stock will move higher on that otherwise-dilutive news, since solvency risk will have once again been reduced by issuing more capital.They Do have About 2 Billion in undrawn liquidity (per Q1 10q) from a credit facility. They pay 0.25% to keep these lines open. and libor + 0.5% when they draw on it.
As more cars were in transit at the end of quarter then ever, The amount available under this facility would have increased from Q1 by about 3-400 Million at least.
This also means the Accounts Payable (AP) will also be higher and this is the nonsense that shorts will latch on to. When they do that, ask them to show AP as a portion of Revenues or Production and they'll go silent. This liquidity talk is a big nothingburger.