First, the allegation that Musk was told by his own employees that the Model 3 couldn’t be mass produced by the end of 2017, which was the company’s stated goal:
Then, after claiming in May 2017 that the company was “on track” to meet its mass production goal, it’s alleged the company hadn’t even finished building its production lines, clearly meaning it wasn’t “on track”. The lawsuit alleges that Musk knew the line was “way behind”:
The suit alleges that the company was building Model 3’s by hand at a “pilot shop” at the same time Tesla claimed to be on track for “mass production”; it also claims that it was “evident to anyone who visited the facility” – including Elon Musk – that the line wasn’t built and that “construction workers were spending most of their shifts sitting around with nothing to do”:
We also read in the lawsuit that Tesla’s Gigafactory, at the time in question, was allegedly capable of producing only one battery pack per day – and that the production of one battery pack took “two shifts” to complete.
The suit alleges that the company’s former CFO, Jason Wheeler – who is one of more than 50 key executives and VPs to have left the company over the last half decade or so – told Elon Musk personally that they wouldn’t be able to mass produce by the end of 2017. The entire lawsuit is available at this link and some of the most interesting content was first shared by critics of the company on Twitter.
The drumbeat of accountability for Elon Musk continues to pound louder and louder as each day progresses, with some analysts calling for the SEC to investigate him if the company doesn’t meet its stated cash flow positive and “no capital raise” guidance for the back end of 2018.
|A Tool of the NWO, Agenda 21 change agent|
Yesterday we detailed how the company is cutting corners with production and suppliers, as well as with its certified preowned vehicle program. Commentators continue to suggest that Elon musk should be held accountable by regulators if the company again raises capital this year or is not free cash flow positive by the second half of this year, two claims that Musk made this week in an angry outburst where he attacked the messenger (The Economist) for pointing out a Jefferies analysis.
The Economist used to be boring, but smart with a wicked dry wit. Now it’s just boring (sigh). Tesla will be profitable & cash flow+ in Q3 & Q4, so obv no need to raise money.
— Elon Musk (@elonmusk) April 13, 2018
Then, on Friday afternoon, CNBC released an scathing report detailing that a large portion of parts supplied to Tesla to manufacture vehicles with has been substandard or defective. The article alleged that:
Tesla is struggling to manage and fix a significant volume of flawed or damaged parts from its suppliers, sending some to local machine shops for rework, according to several current and former Tesla engineers. The company said it also makes adjustments to the design of some parts after receiving them from suppliers.
All automakers have to deal with some amount of defective or damaged parts, both from their own factories and from suppliers. But, as previously reported, current and former employees say that Tesla experiences a higher rate of defects than industry norms. A significant number of flawed parts, and parts in need of design changes, also come from Tesla’s suppliers, they said.
The reason for the large number of defective parts? Spending less time to vet suppliers, according to company employees.
Current and former employees from the company’s Fremont, Calif. and Sparks, Nevada factories blame Tesla for spending less time to vet suppliers than is typical in auto manufacturing. These people said the company failed to comprehensively test “variance specs” with some vendors before embarking on Model 3 production.
Ultimately, it’s Tesla lack of experience and scramble to get a car to market that was leading to the pile up in defects, which will end up crushing the company’s “quality control” reputation, as the following episode suggests:
Auto manufacturing expert Steve Finch, a former GM plant manager with about 40 years of industry experience, said automakers typically deal with some flawed parts from suppliers. Finch said that mass-market car companies normally will take a year or more to vet a prospective supplier. This is to ensure the supplier’s factory follows ISO quality management standards and other processes that are on par with the automaker’s own.
Former and current employees said Tesla took less time before signing on new suppliers. Tesla employees tasked with vetting suppliers were also not always experienced with ISO quality management standards, said these people.
We also pointed out yesterday that Tesla is starting to give other indications that it is stretched very thin – and that this leads to cutting certified pre-owned vehicle corners. Yesterday, Electrek wrote an article detailing ugly new changes to the company’s certified preowned checklist procedures, including the company no longer taking care of cosmetic details, which the article refers to as “refurbishing”:
Now the company has updated its policy and some new cars coming on Tesla’s list of used vehicles have this ‘Not Refurbished’ warning that reads:
“This car has passed a 70-point mechanical inspection and will be cleaned before delivery. If you would like any additional work that is not covered under your warranty, we can help arrange service after delivery for an added cost.”
Tesla salespeople have been telling buyers that the automaker is still making sure that the vehicles are up to their standards for the warranty, but they are not fixing cosmetic issues anymore.
Worst of all, these changes come a time where the company is about to receive a massive inflow of vehicle inventory from three-year leases that started in 2015:
Tesla has changed its ‘certified pre-owned’ (used) vehicle policy this week to stop “refurbishing” its used cars just ahead of them receiving a big influx of vehicles as more 3-year leases are ending. The automaker had launched the program 3 years ago and it has been tuning it over the last two years.
Previously, certified preowned Tesla vehicles not only underwent a inspection to check the mechanics and operation of the vehicle, but they also underwent a cosmetic clean up. The cosmetic cleanup always seemed like an absolute necessity, especially given the fact that Tesla buyers are actually unable to view pictures of the certified preowned vehicles that they’re purchasing:
The cars with this new warning still don’t have real pictures of the actual vehicle, but instead only renderings of the vehicle’s configuration.
Tesla told Electrek that they are soon going to make it easier to request real pictures of listed vehicles.
The change comes as Tesla is getting more and more used vehicles, especially after 3-year leases from 2015 when Tesla started ramping up production significantly and also making strides with its leasing program.
On top of that, the company is still selling these vehicles at premium prices, which the Elektrek article hilariously calls “value retention”:
With the increased inventory and the lack of “refurbishing”, a decrease in price would be expected, but Tesla used vehicles have historically been very good at value retention.
Regardless, the air – and questions – of accountability continues to get thicker around Elon Musk and his band of merry brothers.
If the stock takes another dive next week, what is Mr. Musk going to come up with in order to keep a sense of being such trivial concerns as cash flow and profitability – and more importantly, how long will his lawyers let him keep talking?
Elon was found passed out against a Tesla Model 3, surrounded by “Teslaquilla” bottles, the tracks of dried tears still visible on his cheeks.
This is not a forward-looking statement, because, obviously, what’s the point?
Happy New Month! pic.twitter.com/YcouvFz6Y1
— Elon Musk (@elonmusk) April 1, 2018