Musk urges Tesla workers to cut costs ahead of fundraising round

http://www.bloomberg.com/news/articles/2016-09-02/musk-e-mail-urges-workers-to-cut-costs-in-bid-to-woo-investors

by itg • 10 years ago

89 138 10 years ago

"Tesla burned through $611 million in cash in the first half of this year and $2.2 billion last year..." Can someone explain WHY this company wants to buy SolarCity?

martinko3• 10 years ago

Despite Musk's positioning on the topic it really feels like a bailout of his other investments. Does anyone have information regarding the time of the shareholder vote on the merger? Given that Musk and co. will abstain, there might be a reasonable chance that it will not go through.

prklmn3• 10 years ago

Some people are indeed naive enough to be every word that comes out of his mouth. However, you are correct - this was a bailout that screws TSLA shareholders, plain and simple. SCTY was arguably heading towards bankruptcy.

http://www.fool.com/investing/general/2016/05/11/solarcity-i...

http://www.zerohedge.com/news/2016-06-22/analyst-slams-tesla...

andrewtbham2• 10 years ago

it will go through. if you didn't like the deal, you sold the stock. they have a lot of the same large investors, that have already approved the deal, such as fidelity.

lukasm• 10 years ago

The biggest problem for Tesla is battery cost. They have to increase the production to drive down the price, so they want to leverage SolarCity to sell more Powerwalls. Tesla can use solar panels for supercharger stations where grid electricity is not available. You can create a new product or solution etc. etc. There is quite a lot of synergy.

sachingulaya2• 10 years ago

You may be underestimating the power draw of supercharger stations. My model X pulls 200-300Amps of 400V power at a supercharger station with 8-12 stalls.

That is over 80,000watts per stall.

martinko3• 10 years ago

Eh. Is solar really currently a viable alternative that can power superchargers?

ksherlock• 10 years ago

Space X has purchased $225 million in Solar City bonds. Elon Musk has a 21% stake in Solar City (he is also buying $65 million in Solar City bonds, half of their most recent offering).

farcical_tinpot10• 10 years ago

Funny, but inevitable. Musk was asked specifically if Tesla would takeover SpaceX or vice versa in a tesla conference call and he said no, but it is really inevitable. Without some creative accounting through shifting investor cash and grants from one company to another Solar City has no future, and that then goes for Tesla as well.

hughperkins• 10 years ago

i thought solar cells are dirt cheap, because China can produce them at very low cost?

andrewtbham2• 10 years ago

https://www.tesla.com/blog/master-plan-part-deux

the_mitsuhiko• 10 years ago

Most likely lack of options.

endswapper• 10 years ago

In addition to the article itself, there are multiple, thorough discussions that attempt to answer your question over here: https://news.ycombinator.com/item?id=12405092

farcical_tinpot10• 10 years ago

Part of some half-arsed rescue attempt. Solar City doesn't have much life left to it on its own and it needs some creative accounting to stay afloat.

Keyframe• 10 years ago

Interesting question, considering buying someone like Saft would make more sense in their current position.

_ph_• 10 years ago

While they have about $16 billion in Model 3 orders. So to actually sell so many cars, they need to invest a lot to get the production going. Part of that is the Gigafactory, but also the production line and of course, the parts for those cars have to be bought, before the cars can be made and sold. So the next quarters will see a lot of more spending that has to be balanced with the future Model 3 revenue.

The SolarCity acquisition is certainly risky, but there are large business overlaps as other posters have described.

sna1l• 10 years ago

I wonder what kind of cost cutting they will do. Whenever I hear cost cuts, I always think layoffs, but at a time where they need to ramp up production, I feel like that would be counterproductive.

farcical_tinpot10• 10 years ago

There will be a call to cut whatever costs they can, which won't get far, and then there will be layoffs.

godzillabrennus• 10 years ago

Steve Jobs had some cost cutting conversations during his day as well: https://youtu.be/BNeXlJW70KQ?t=16m14s

Great leaders know when to cut costs to save great companies.

brakmic2• 10 years ago

As far as I know Bill Gates saved Apple.

angstrom2• 10 years ago

And luck save Apple as much as Bill Gates. He may be a great philanthropist, but corporate philanthropy isn't his shtick.

melling• 10 years ago

A bit of an oversimplification. If Apple hadn't produced products that people wanted, the loan/investment wasn't going to help. If Bill had said no, it's hard to know if Steve had another avenue for the money. Wasn't he rich again because of Pixar?

http://blogs.wsj.com/wsj125/2014/11/29/nov-30-1995-pixars-ip...

deno• 10 years ago

Microsoft's $150 stock investment was the result of a settlement of a lawsuit.

http://www.zdnet.com/article/stop-the-lies-the-day-that-micr...

untilHellbanned• 10 years ago

Koolaid.

jacquesm• 10 years ago

I don't like these SpaceX-Tesla-Solarcity cross links one bit. If one of them falls it could cause the rest to go with it.

Solar City 'power walls' are a shaky proposition at best, if that becomes a key element in Tesla succeeding then they have a problem.

farcical_tinpot10• 10 years ago

The whole Solar City/Tesla crossover I can see in a way, when you've proved the technology and are making some profit from it. Tesla and Solar City are a long, long, long way from doing that and the Solar City takeover is a way of saving it, not because of any sensible plan and integration.

nardi2• 10 years ago

Tesla makes the Power Wall. And they have had a ton of orders for them. Those are an asset, not a liability. And merging with Solar City will actually help them sell those with less overhead.

FireBeyond• 10 years ago

The Powerwall is at least a commercial disappointment, if not poor performer / sale: https://www.google.com/?client=safari#q=powerwall+poor+sales

TaylorAlexander2• 10 years ago

Wait, wait... you're saying that a battery is a shaky proposition? For an energy company that currently can only provide energy during the day?

SolarCity is an energy company. They collect and sell energy. They do not sell any solar panels. They use the customer's homes for a distributed collection system. But they sell energy. And currently they cannot sell energy at night.

Conveniently, lithium batteries are a proven product growing in popularity. What's sweet is that SolarCity has close ties to a company that has shipped more large scale lithium batteries than any other company in the world. Nissan has shipped a lot of 24 kWhr battery packs since 2011, but Tesla has been shipping 56 kWhr packs since 2008, 85 kWhr packs since 2011, and now ships 100 kWhr packs.

You know what would be great? If Tesla sold more product, and if they did so through a partner company that needs lots of batteries.

Oh boy, then they'd need a bigger factory! If only...

Avshalom3• 10 years ago

Solar City also can't generate energy at night. Which means to sell energy at night they'd have to stop selling it during the day.

Also energy has a lower price at night. Which means they'd make less money if they stored it during the day and sold it at night.

sremani• 10 years ago

SolarPV + EV + Powerwall, can be a good proposition. Especially when an use EV battery is repurposed for Powerwall. The only problem in the current vision is burn-out rate, Tesla + SolarCity are buring cash fast, but if they can survive this, Tesla will be unstoppable company with tremendous synergies.

stevep984• 10 years ago

My model S has been in the shop after a collision since a June 10. The repair shop has been waiting for parts. The last thing we're waiting for is some kind of spring related to the airbag assemblY. Originally tesla said they would pull one off the production line since I waited so long, but now they are backing off that. It's going to be at least another 3 weeks.

Be aware if you are buying a car from tesla, that you are at their mercy in terms of parts. There are no third party parts available, and tesla is using all the parts for new cars.

nitrogen• 10 years ago

Do they provide a loaner in that case, even if not a Tesla? Or maybe your insurance company?

chrisper2• 10 years ago

My car insurance policy has rental car coverage, but I think it has a limit.

stevep984• 10 years ago

Car insurance would give me a rental, but I didn't bother because I already have my old SUV.

brianbreslin• 10 years ago

That's not tesla exclusive. My dad's been waiting 3 months for a replacement airbag for his 2008 lexus. They were one of the ones takata (sp?) recalled but can't make enough replacements.

chrisper2• 10 years ago

This seems to be a circumstantial issue that is probably not the norm. Kind of like a special case!

davidf1810• 10 years ago

Sorry to hear about the 3 month delay and provides some insight in the construction of luxury cars at least Lexus. Auto manufacturers were warned that the propellant for the airbags was dangerous and were warned by other airbag vendors who refused to use it to save a few dollars per airbag and lost the contract to the Japanese airbag vendor.

I wonder if other luxury brands such as BMW, Mercedes, Audi, used these types of airbags. I'm guessing not.

Cookingboy• 10 years ago

The Takata global airbag recall is a big exception. It affects many (most?) major automakers. Lexus had no control over the availability of spare parts in this case.

davidf1810• 10 years ago

Well, that's clearly wrong. I would ask for my money back. You spend $100,000 on a car, and the manufacturer can't be bothered to care enough for customers to ensure that there are enough spare parts available.

Someone like Henry Ford, actually used to be a mechanic/engineer that built cars himself. I wonder if Model T owners had problems getting parts!

Visionaries are interesting and get media attention, but I prefer leadership that have personally "gotten their hands dirty." instead of a "business type."

qaq12• 10 years ago

You do realise Musk is very competent engineer among other things? He is fairly far removed from "business type"

RomanAlexander• 10 years ago

They didn't give you a loaner? My Model S brakes were slightly squeaky and Tesla gave me a loaner vehicle to use for the duration of the service.

cstejerean4• 10 years ago

Was the duration of your service almost 3 months? I can't imagine then having enough loaners to hand out for weeks at a time.

farcical_tinpot10• 10 years ago

It's a bit late now. When your company is basically one research and development project you need to cut all costs down to specifically those that's going to provide you with a product you can sell, and then keep iterating over until you can sell for a profit. You do the boring grunt work until that is achieved.

The fact that Musk told us stage one was done when he came up with that ridiculous grand plan, designed to drum up yet more investor cash, was laughable. Once the Model 3 sells for a profit, and for $35,000, which it never will do, then you can start looking at further grand plans. The Model X was a ridiculous distraction with gull-wing doors any sensible automotive engineer would have pointed out was a production and maintenance nightmare that would never end well.

They're also swallowing Solar City, basically to save it, not because of any grand plan for 'synergy' as Musk says that makes sense.

The Emperor's clothes are starting to dissolve and the wheels are coming off I'm afraid.

eclipxe• 10 years ago

Falcon Wing Doors

farcical_tinpot10• 10 years ago

Whatever. It's kind of like arguing whether you sat on deckchairs or garden chairs on the deck of the Titanic.

usaphp• 10 years ago

The worst thing about those falcon doors on model x is that I keep hitting my head ( I am 6'3") on the pretty sharp corner when it's sometimes not fully up, just like this bmw ceo did: https://electrek.co/2016/03/07/bmw-ceo-tesla-interview-model... I think it's a pretty terrible door usability wise, but it brought some marketing buzz to model x, like a wow factor

mrfusion• 10 years ago

I don't understand who decides to put sharp corners on doors. It seems like an unnecessary danger.

adventurer• 10 years ago

Normally you're pretty careful opening a door that hasn't fully opened. It's too bad it was held down and he tried to exit it without looking.

qaq12• 10 years ago

It might be cultural differences but it always amazes me how people can have such strong opinions without even a tiny doubt that there might be a chance that the person they are criticising is a bit more informed/experienced and is maybe taking actions based on their knowledge and experience.

aphextron2• 10 years ago

Normally I'd agree with you on this point, but it seems that Musk is the one displaying hubris here. The gullwing doors were a blatant disregard for the 100+ years of engineering expertise that has converged on the current design of a car door, and throwing that out the window for something flashy and attention grabbing. The criticism is well deserved.

adamlett• 10 years ago

The problem is that Elon Musk has a history of not keeping his promises. Sure, we got the Model S, but late, and a lot more expensive than promised. With the Model 3, he is promising even more.

It's relatively easy to build an expensive luxury car. It's incredibly difficult to mass produce an affordable mass market car. We have yet to see any evidence that Tesla is capable of doing so.

This is not just something that I believe. Lots of people believe it, and put their money where their mouth is. Tesla is one of the most shorted stocks there is.

hourislate• 10 years ago

I was thinking the same thing after reading OP's comment.

I wouldn't even try to wrap my arms around what Elon is doing. Cars, Energy, Rockets, etc. It's not everyday that someone who wants to change the status quo comes along. All I know is he must be very lonely with so many people hoping he fails.

farcical_tinpot10• 10 years ago

I'm afraid it's a case of "Show me the money", meaning, "Have you achieved what you say you can and have before you move on to the next grand vision of the future?"

For him to say that 'stage one' is complete is laughable. We haven't seen Model 3s on sale for $35,000 yet, we haven't seen whether Tesla can get the required production (which they simply can't) and they haven't achieved profit on any car at all yet.

partiallypro• 10 years ago

I love Tesla cars, I think they look amazing, the technology behind the is incredible...but it is just not well run in terms of money. Musk is a visionary, but seems to overlook his cash burn. I am waiting for the headlines when people are talking about Tesla'a stock plummeting down to earth. Maybe he has enough billionaires in his network of friends to keep him going long enough to maintain his image. I don't know. People aren't as friendly with their money during economic downturns and we're due for one. That's when we'll find out what lies beneath the veneer.

I love his work, but I question his financial decisions.

greglindahl• 10 years ago

You are commenting on an article which is all about Musk paying attention to cash burn.

prostoalex2• 10 years ago

I am not very good at Twitter search, but at some point Elon pointed out that out of all US car companies only two have never went bankrupt - Ford Motors and Tesla Motors. The car manufacturer industry does not have any good role models on being run well in terms of money.

blubb-fish• 10 years ago

I think one big problem about privatization of such complex projects is that if they go down the acquired knowledge and research results might end up nowhere instead of being reused by a following generation of companies and researchers.

Musk urges Tesla workers to cut costs ahead of fundraising round

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