After the Wall Street Journal reported that Tesla asked some suppliers to refund payments going back to 2016, the automaker says it asked fewer than 10 suppliers for reductions as “a standard part of the procurement process.”
Tesla said any changes with these suppliers would improve future cash flows, but not impact its ability to achieve profitability in Q3.
The Wall Street Journal story cites a memo from Tesla to a supplier asking them to return a portion of payments going back to 2016 in an effort to help the company reach profitability. Many industry watchers see the news as another sign that Tesla is running out of cash. Tesla shares were down 5 percent in early trading on Monday and closed down 3.3 percent.
Tesla’s full response to the WSJ story is below:
“Negotiation is a standard part of the procurement process, and now that we’re in a stronger position with Model 3 production ramping, it is a good time to improve our competitive advantage in this area. We’re focused on reaching a more sustainable long term cost basis, not just finding one-time reductions for this quarter, and that’s good for Tesla, our shareholders, and our suppliers who will also benefit from our increasing production volume and future growth opportunities. We asked fewer than 10 suppliers for a reduction in total capex project spend for long-term projects that began in 2016 but are still not complete, and any changes with these suppliers would improve our future cash flows, but not impact our ability to achieve profitability in Q3. 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. This is the right thing to do.”
Tesla said any changes with these suppliers would improve future cash flows, but not impact its ability to achieve profitability in Q3.
The Wall Street Journal story cites a memo from Tesla to a supplier asking them to return a portion of payments going back to 2016 in an effort to help the company reach profitability. Many industry watchers see the news as another sign that Tesla is running out of cash. Tesla shares were down 5 percent in early trading on Monday and closed down 3.3 percent.
Tesla’s full response to the WSJ story is below:
“Negotiation is a standard part of the procurement process, and now that we’re in a stronger position with Model 3 production ramping, it is a good time to improve our competitive advantage in this area. We’re focused on reaching a more sustainable long term cost basis, not just finding one-time reductions for this quarter, and that’s good for Tesla, our shareholders, and our suppliers who will also benefit from our increasing production volume and future growth opportunities. We asked fewer than 10 suppliers for a reduction in total capex project spend for long-term projects that began in 2016 but are still not complete, and any changes with these suppliers would improve our future cash flows, but not impact our ability to achieve profitability in Q3. 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. This is the right thing to do.”
