Tesla's Klaus Grohmann Ousted After Clash with CEO Musk

http://www.reuters.com/article/us-tesla-germany-exclusive-idUSKBN17T2IY

112 63 9 years ago

Unfortunately absent from this article was an assessment of Grohmann's contributions to Tesla and the ramifications of his departure. Otherwise the reader is left to assume for themselves who was in the right or wrong, and whether it was a good or bad decision for Grohmann, Tesla, or both.

bborud• 9 years ago

If the relationship is irreparably damaged, staying on might be worse than leaving.

dsp1234• 9 years ago

absent from this article was an assessment of Grohmann's contributions to Tesla

The second and third paragraph of the article explain who Grohmann is in relation to Tesla:

counting on Grohmann Engineering's automation and engineering expertise

described Klaus Grohmann and the company he founded as a "world leader in highly automated manufacturing".

Later:

the workforce felt insecure about becoming so dependent on one client after the founder's departure.

The rift is explained throughout as being basically, should Grohmann Engineering focus on Tesla above it's prior automative relationships with Tesla competitors? Musk says yes, Grohmann says no.

And the last two paragraphs show what immediate effects Tesla is going to have to deal with (compensating existing Grohmann customers, and pressure from the German labor union)

chollida1• 9 years ago

Grohmann disagreed with Musk's demands to focus management attention on Tesla projects to the detriment of Grohmann Engineering's legacy clients, which included Tesla's direct German-based rivals Daimler (DAIGn.DE) and BMW (BMWG.DE), two sources familiar with the matter said.

I mean, how was this not brought up and made a settled point before Tesla acquired his company? Big fan of Musk but this is on his shoulders. According to reports, Telsa is already talking to other Grohmann customers, read their competitors, on how to compensate them for breaking the contracts.

Now they are facing the same engineers they just acquired wanting to go on strike.

I'd start to worry about how Tesla is going to fund Model 3 manufacturing, buying out competitors from contracts that they don't want to fill, and how to deal with a set of key employees who may want to unionize and certainly want higher pay, but Tesla just somehow always seems to find a way.

The stock is close to its all time highs, and short interest is at the bottom of its trailing year, so I guess I'm not the only one who has just thrown up their hands and just let Elon have his way.

At what point does shorting Telsa join "starting a land war in Asia" as a rule to live by:)

From Zero Hedge....

The German labor union IG Metall has demanded that Tesla's management formalize multi-year job guarantees and increase salaries as a way to provide assurance amid management turmoil. The alternative is a strike which could lead to further "unexpected" delays for the Model 3, and even more hyperbolic statements from Musk on his twitter account to deflect attention from increasingly growing problems in Tesla's paradise.

EthanHeilman• 9 years ago

This shows that Tesla is focused on getting the Model 3 produced above all over considerations. They are playing to win not playing it safe.

colechristensen• 9 years ago

All of these events seem predictable and even desirable. Part of the benefit of acquiring Grohmann Engineering is depriving competitors of their services, and the costs include buying out contracts and appeasing labor. Turnover at an acquired company isn't unusual, nor is friction in the transition.

NathanKP• 9 years ago

If Tesla was smart and gave these aquihired employees adequate golden handcuffs and noncompete clauses then I agree. But if they didn't and key employees just leave and use their expertise to start another company that helps out the competitors again then Tesla will have played themselves.

jacquesm2• 9 years ago

Turnover at an acquired company isn't unusual, nor is friction in the transition.

Things are a bit different in Germany than in the USA when it comes to this.

achamayou• 9 years ago

Maybe it was brought up and discussed, but what's happening now wasn't what was agreed at the time? Who knows.

wand3r3• 9 years ago

This is a common occurrence in business even if ugly. Similar circumstances happened to Tesla with Mobile Eye and Google, FB, Microsoft do this regularly. Potentially it did come up and he was mislead to make the sale, maybe their strategy changed or something in between.

I mean, Tesla was started as AC Propolsion and the CEO was fired, although fairly different circumstances. Either way, when you sell you sell control.

FullyFunctional• 9 years ago

Kindly fact check; when Tesla started, they bought technology from AC Propulsion, but it was analogue and for various reasons they ended up having to reimplement everything themselves from scratch. AC Propulsion is still around AFAIK.

lacker• 9 years ago

I mean, how was this not brought up and made a settled point before Tesla acquired his company?

Probably something like, "The plan is X but of course the details aren't set in stone, we're a fast-moving company so we'll revisit our roadmap every so often." And then down the road Elon wants to do something that Grohmann strongly disagrees with, and the only plausible resolution is to fire Grohmann.

This doesn't seem too surprising to me. Tesla bought this company to make Teslas. Why should Tesla spend any effort at all helping BMW and Daimler make cars? Maybe there's some rationale there but it doesn't surprise me that it is low priority.

mathperson3• 9 years ago

I'm not saying they aren't reliable in this instance but I encourage you to be VERY skeptical of zero hedge..

prklmn• 9 years ago

Model 3 deliveries rescheduled to sometime, eventually...

alexandercrohde4• 9 years ago

Lowly tech gossip, nobody will look back in a year and say "I'm so glad I read that article."

I wish there was no segment of HN that cared about this.

Declanomous2• 9 years ago

I don't care for the gossip, but I do appreciate the discussions it often spurs in the HN comments. There are already a few good comments here, and without this post we wouldn't have those comments.

kinkrtyavimoodh2• 9 years ago

I'd enjoy the discussion more if it didn't always for some reason beeline to Tesla's stock price.

alexandercrohde4• 9 years ago

[Got downvoted to hell, which almost never happens to me, but I believe it's worth saying] Well I might agree if the discussion was anything more than names of people and companies I'll never hear again. What I'm not hearing is anything about the big picture.

We as a species may die due to global warming, according to some models. Tesla is, by my measure, the tech company that comes closest to addressing this in any way. I couldn't care less about internal gossip and politics, I care about the greater vision. Politics are not business, they are an obstacle to business.

grzm2• 9 years ago

Do you think this may have an impact on Tesla's ability to ramp up their production? I think that's likely what interests many on HN.

alexandercrohde4• 9 years ago

I'm asking why would you read every successes and hiccups of every company (google, facebook, YC, uber, yahoo, tesla)? In the scope of things, each of these is trivial, it'd be like somebody writing a news article on your slipping and falling on your face, in the scheme of things it's entirely irrelevant to your larger success.

Why speculate? Wait and see.

leggomylibro• 9 years ago

I sympathize with the guy. Big companies today will say to your face that they own your soul, not just your labor on the clock, and act affronted when you disagree.

This luminary was passionate about automation, and wanted to continue fulfilling the purposes of his company which specializes in automation. His intentions with regards to that were almost certainly abundantly clear at the time of purchase. Tesla just figures, they're the owners now so it's their way or the high way.

"I definitely did not depart because I had lost interest in working," had may as well be printed on every business lawyers' card, because it's probably the most common thing they hear in exit interviews. Your over-protective clawing is costing you your workers, idiots!

swalsh• 9 years ago

This sounds familiar, reminds me of when Amazon acquired Kiva, they too had rivals as customers. Amazon decided to slowly stop supporting existing customers, and focus only on its internal operations.

I think the lesson here, for something as crucial as automation, you're taking a risk when purchasing robots from vendors.

Animats• 9 years ago

That was a shock to the material-handling industry. Vendors have gone out of business before, but usually someone acquires the assets and services the existing machinery. That didn't happen with Kiva. Existing Kiva customers were no longer able to buy more Kiva robots. It's not even clear they can get replacement parts. "Amazon Robotics ... encouraged prospective users of Kiva technology to let Amazon Robotics and Amazon Services provide fulfillment within Amazon warehouses using Amazon robots."

[1] https://www.therobotreport.com/news/filling-the-void-left-by...

jacquesm2• 9 years ago

I predict a lot more attention to 'change of control' clauses in supply contracts.

jansan4• 9 years ago

IMHO this is despicable business behavior of Tesla. As someone who worked at a very large European car supplier, I know that companies like Grohmann are build with the help of the big players (car manufacturers or bigger suppliers), who invest a lot of time and money to ensure that they get a reliable supplier for the future. Our purchase department had special people who helped several smaller companies in the Czech Republic to become suppliers able to meet the requirements of European car manufacturers. They would have never made it by themselves.

Tesla should not be surprised if Grohmann will see a tit for tat and run into difficulties cooperating with other German suppliers, which they most certainly rely on.

dtparr• 9 years ago

I'm curious, what do you believe is the minimum level of help a company must provide its suppliers in order to turn a competitor buying them out into despicable business behavior? Is simply being a long-standing customer enough? How long is a supplier that is provided help ethically required to continue supplying?

jansan4• 9 years ago

In my personal opinion purchasing a long standing supplier of many companies with the intention to remove it from the free marked is despicable already.

threesixandnine• 9 years ago

And they would never cash in huge profits if it were not for 3x cheaper Czech labour, land and huge incentives from local govs. Why do you think those suppliers owe anything to anyone? Big players that helped those small suppliers are the same as Tesla in this case.

Heliosmaster2• 9 years ago

Exactly. They certaintly didn't fund the company out of interest of the Czech employees. Somebody ran the numbers and thought it could be a profitable investment.

Apple is doing stuff that's not too different: using their large cash to lend money (with lower interest than a bank) to Chinese manufacturer, so they can build the factory and hire the labor to manufacture the Apple products. And Apple cashes in with interests, with cheaper products and exclusivity deals for some time. It's a win-win-win for them.

petre2• 9 years ago

He sold his company. Tesla could have killed it just to deny its competitors assembly line equipment. We are talking American business ethics here, not German business ethics. If it was that critical to them, BMW and Diamler could have instead jointly bought Grohmann Engineering, like they did with Here Intetnational BV stock along with VW.

speeq• 9 years ago

Letter from Elon Musk to Tesla Grohmann employees (writing by Musk in English, then translated into German and then back in English, Source: https://electrek.co/2017/04/27/tesla-advanced-automation-mod... )

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Tesla Grohmann – Mail from Elon I am very grateful that last Thursday I had the opportunity to talk to you and I wanted to give you some additional thoughts.

Tesla is unlike most other companies. Unlike other companies, the existence of Tesla is not only to make money. If it were only about this one goal, then I can tell you that the founding of a completely new car manufacturer would definitely not have been the smartest way. Our foundation and the foundation of everything we do is to accelerate the advent of sustainable energy. The welfare of our planet is in great danger, and in order to solve this problem, we need a sustainable solar energy production, we need a sustainable way to store the energy in stationary batteries and we need a sustainable way to consume this energy with electric vehicles. It is critical of the future of humanity to solve this problem – we all want a better world for future generations.

Tesla has made a number of important steps towards achieving this mission in the last 14 years of our existence, but none is more important and can make a bigger difference than Model 3. For the first time ever, there will be an electric vehicle that people can afford and which people love. When Tesla was founded, no one thought that an electric vehicle could ever be more than a golf cart. Today, Model S is the best-selling vehicle in its class. Model X is fast to pick up and recently won a golden steering wheel. And Model 3 is on the brink of production start – just one year after the most successful product launch ever. After the Model 3, many other vehicle products will come, for which Tesla Grohmann will play a key role. To name just a few, which have already been publicly announced (there will be many more): We are developing Model Y (an affordable mid-range SUV), a heavy-duty semitrailer, a pickup and the next generation of the roadster sports car.

And these are only the cars. Tesla is about to launch a new solar roof into the market that will completely change the importance of the use of solar energy. Tesla will soon produce more batteries than the entire world has produced in 2013. These batteries will enable everything to be operated with sustainable energy, including the cars we manufacture. I was never more optimistic about the future of Tesla. Although it is not what drives us, Tesla has the real potential to be one of the most valuable companies in the world.

We bought Tesla Grohmann because we believe that Tesla Grohmann will play an important role in creating this future. It is not enough to produce cool products. To be successful, we need factories that are as good as the products themselves.

This brings us to the current topics at Tesla Grohmann:

First, the question of trust and the longing of every employee for job security. I understand that you are concerned about our decision to focus on Tesla projects instead of serving external customers. We have made this decision, because just so much work has to be done on critical Tesla projects. We really have so much to do that we will be able to hire even more extraordinary talents, and we plan not only an expansion of the team, but also our production facility in Prüm. For all these reasons, I would like to assure everyone at Tesla Grohmann that we will not be able to reduce our workforce in the foreseeable future, Even after these five years, we are expecting further growth at Tesla Grohmann and do not expect any personnel reductions. However, we wanted to give you absolute security for a definite period of time. This is a promise you can rely on and I will ensure that it is also formally implemented.

Second, on remuneration. Last week, we announced that each employee at Tesla Grohmann Tesla will receive shares worth 10,000 euros (US $ 10,000), distributed quarterly over the next four years, and an immediate bonus of more than 1,000 euros in cash. This is just the beginning for each Teammitgled. We will also enter into discussions immediately with the works council to ensure that the remuneration of each individual employee is competitive and corresponds to the local cost of living. Of course, no one at Tesla Grohmann should earn less than he can expect on the local labor market; Just as no one would reasonably require the remuneration in Prüm to be as high as in cities like Stuttgart or Munich, where the cost of living is much higher. In any case, every Tesla Grohmann employee will have the chance to earn considerably more salaries and shares than is usual in the industry and relative to the cost of living in Prüm. Unlike other automotive manufacturers, each Tesla employee receives Tesla shares in addition to salary. These shares can be easily sold for money, but they also open up the possibility of earning much more through stock appreciation. The tenfold increase in our share price over the past five years has made our shareholding exceptionally profitable for our Tesla employees. I firmly believe that we have the potential for a further ten-fold increase over the next five to ten years. That would make a total value of € 100,000 from the share of the share of € 10,000. Although we would not recommend it to anyone, because it is very likely less worthwhile, all those who would rather have a simple cash bonus, instead of the shares, would demand 2,500 euros in cash every year. Tesla firmly believes that extraordinary performance must be rewarded with additional cash and share bonuses. So this is only the beginning.

Thirdly, it is clear that you would like to see more changes at the workplace. At Tesla, we are proud to offer a pleasant, fair, and exciting work environment. It is very important for me that you like to work every morning. We have drawn up a long list of change measures to bring Tesla Grohmann to the conditions at other Tesla locations, as well as changes that are specific to Tesla Grohmann and which we are now trying to implement. This list will be visible in all buildings visible to all. We will update the list on a regular basis so that everyone can see what changes have already been made, which are currently being implemented and which will be implemented soon. You should see every week that improvements happen.

Finally, I know that IG Metall wants to bring the workforce of Tesla Grohmann on the union line. I would like to share my thoughts with you. It is my firm belief that the separation of the workplace into “executives” and “employees” does not create a good working environment. We want to create a system of equality without artificial barriers so that someone can start as a trainee and one day lead the entire company. This is why we eliminate all the special privileges of the executives. For example, everyone will have equal access to parking, eating the same tables, and there will be no management offices. I am convinced that managers should work at the forefront, in the same work environment as the entire team. Even though I run the company myself, I still do not have my own office and often moved my workplace to the most challenging area in the factory and slept on the factory floor when there was a real crisis. Managers should always take care of their team before they take care of themselves – the supervisor is there to serve his team – not the other way round.

As I said at the beginning, everything at Tesla serves our mission and I do not believe that IG Metall is sharing our mission. They have publicly announced in the press that electric cars do not take care of them. In addition, they have a real conflict of interest because their top priority will always be the members of the hugely established automotive manufacturers: their potential of membership is much greater than at Tesla Grohmann.

I would like to thank you for all the contributions you have made to Grohmann over the years. I look forward to what we can create as a tightly integrated team together.

Elon

danderino• 9 years ago

Tesla is not going to revolutionize energy through selling electric cars and solar panels.

I find the idea pretty laughable.

Tesla's Klaus Grohmann Ousted After Clash with CEO Musk

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