Bleeding cash and desperate to show a profit, Tesla has been asking suppliers to give back some of the money the company had given them. After news of this leaked out, investors weren’t taking it well. Angus Whitley reports in Bloomberg:
Tesla Inc. asked some suppliers to return a portion of its payments to them in an attempt by the electric-car maker to turn a profit, the Wall Street Journal reported, citing a memo sent to a supplier last week.
The company, whose eroding cash position has alarmed investors, requested a “meaningful” amount of payments made since 2016 to be returned, according to the letter. The note stated all suppliers had been asked to help the Californian company become profitable.
The request indicates more struggles for Tesla in its quest to reverse losses. While Chief Executive Officer Elon Musk proclaimed a “real” carmaker after hitting a weekly goal of producing more than 5,000 mass-market Model 3s, there are doubts the volumes can be sustained. Some of the increased output, pivotal for boosting revenue and earnings, came from a makeshift tent.
Tesla fell 4.3 percent to $300.17 in trading before U.S. exchanges opened.
The U.S. auto manufacturer declined to comment on the specific memo, but confirmed it’s seeking price reductions from suppliers for projects, some of which go back to 2016, according to the report. Tesla called such requests a standard part of procurement negotiations to improve its competitive advantage, especially as it increases Model 3 production, the Journal said.
Read more here.
Jeremy Jones, CFA
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