Tesla Faces New Model 3 Delay As German Workers Threaten Strike; More Headaches For Musk Emerge

Tyler Durden's picture

In the latest potential setback for the on-time delivery of Tesla's Model 3, I4U reports that Tesla is facing a potential strike at its new German subsidiary. Tesla acquired Grohmann, a specialized machine manufacturer, for about $150 million several months ago and now the German Trade Union IG Metall has warned that it is exploring a worker strike at Tesla Grohmann. A key supplier, the machines built at Tesla Grohmann are used to manufacture the Model 3. As a result, the Model 3 production start in July could face another imminent delay.

According to I4U, the 660 Tesla Grohmann employees are paid 25 to 30% less than the union rate. While Tesla, which says it seeks to maintain good relations with Grohmann workers including competitive wages, has offered to pay each employee €150 per month more that does not satisfy IG Metall. Tesla has also offered to increase compensation through a Tesla stock program, however that will be a tough sell as German workers are not used to this kind of compensation.

As a result, the trade union is exploring the possibility of a strike at Tesla Grohmann next week, IG Metall Trier speaker Patrick Georg told the German Welt am Sonntag newspaper, with the union stating that "we’re checking next week if a strike is possible."

Meanwhile, Tesla has cancelled all outside contracts at Grohmann. This move has fueled the labor dispute as employees fear about their jobs. Tesla has countered that it plans to grow Tesla Grohmann, but the focus is on its own needs for machines to make electric cars. Another factor for the increased insecurity of the Grohmann workers is the sudden departure of the founder.

The launch of the Model 3 has already been delayed later than originally planned. Another delay would give the competition more time to counter the looming flood of the electric car market with the affordable Model 3. Elon Musk confirmed last week that the final production version of the Model 3 will be unveiled in July, although a prolonged strike will likely lead to further delays.

* * *

Separately, in another union-related complication, Electrek reports that the United Auto Workers union has tentatively probed Tesla’s Fremont factory to potentially join their union on a few occasions in the past few years, but it looked like they quickly let it go. This time, however, appears to be different since the organization has kept the pressure on the company since a first publicized effort in February.

According to Electrek the UAW sent out organizers who have now enlisted “community groups”, mainly labor groups, to call on Elon Musk and Tesla “to revise their strict confidentiality agreement to allow employees to discuss working conditions” – aka “talk about unionizing.” Since the beginning of the effort to unionize, a few employees have gone public about concerns they have with salary and working conditions at the plant.

In February, CEO Elon Musk said that he would investigate the claims and a week later, he addressed the concerns in an email to all employees, which was leaked. It seemed to have stopped the UAW’s effort until now. A recurring concern that came up in the previous complaints is that the confidentiality agreement that Tesla makes its employees sign is “preventing them from speaking up about working conditions”.

It seems to be the main issue brought up in this new letter to Musk that the UAW signed, along with other local labor groups. The full UAW letter can be found here.

That’s the second effort of the sort. In January, local California state assembly members reached out to Tesla to ask the same thing.

 

In his response, Tesla General Counsel Todd Maron clearly stated that the confidentiality agreement is to prevent leaks about Tesla’s products and business, and that it is not about preventing employees from discussing work conditions.

While the UAW and a few employees have been vocal about their concerns over working conditions at Tesla Fremont, it’s impossible to say if it’s actually a widespread sentiment among the more than 6,000 workers at the plant. In the past, UAW President Dennis Williams said that they were “respecting Tesla’s startup status” up until now, but they are seeking to get involved apparently since Tesla is about to increase its production capacity with the Model 3, which could involve hiring 3,000 more workers at the plant.

* * *

Meanwhile, as Tesla is facing growing labor pains, Apple continues to gain ground on the holy grail pursued by both Tesla and Uber: self-driving cars. On Friday, Reuters reported that Apple has secured a permit to test autonomous vehicles in California, "fuelling speculation that it is working on self-driving car technology in a crowded arena of companies hoping to offer those cars to the masses."

The permit allows it to conduct test drives in three vehicles with six drivers, the state Department of Motor Vehicles said on Friday. The vehicles are all 2015 Lexus RX450h, according to the DMV.

 

Although it has never openly acknowledged it is looking into building an electric car, Apple has recruited dozens of auto experts in recent years, and the permit pulls the curtain back a bit on any possible plan.

 

"This does confirm what's long been rumored: that Apple is at least toying with the idea of getting into the autonomous game in some capacity," said Chris Theodore, president of consultancy Theodore & Associates, and a former vice president at Ford Motor and Chrysler.

While Apple executives have been traditionally coy about their interest in cars, Tim Cook has suggested that Apple wants to move beyond integration of Apple smartphones into vehicle infotainment systems. In doing so, Apple joins a growing list of traditional carmakers, technology companies, and small start ups to test drive cars in California - all vying to be the first to have commercially viable vehicles on the roads.

* * *

Finally, in today's Heard on the Street, the WSJ's Charlie Grant once again looks at the age old question: "what is Tesla really worth", noting that even as Tesla becomes the most valuable US carmaker by market cap, its profits remain far behind:

"Tesla now trades at 271 times projected 2018 adjusted earnings, according to FactSet.  Ford and GM, in contrast, trade at less than seven and six times the 2018 estimate, respectively. Tesla gets that valuation because it is expected to upend the auto industry, while earning big profits that would bring down the multiple."

Is that possible? Here is Grant's math on what Tesla, which sold about 76,000 cars in 2016 and lost $675 million on sales of $7 billion, would need to do:

... to actually earn enough profits to reduce Tesla’s multiple to something in the realm of reasonable would require almost heroic assumptions. First, the basics: Say Tesla’s valuation should be 10 times higher than GM and Ford’s, and say Tesla’s share price stays constant at about $300. That means Tesla would need to earn $4.29 a share in 2018, which equals $700 million in total net income, assuming the current share count doesn’t change.

And the assumptions:

CEO Elon Musk forecasts Tesla can produce 500,000 cars in 2018, while analysts, a bullish lot, peg the number of deliveries at 302,000. Let’s say the delivery number is 380,000. Pencil in an average selling price of $50,000—Tesla will still be selling high-priced Model S and Model X vehicles along with the  Model 3. That scenario yields just under $21 billion in automotive revenue. Add another $2 billion in sales from its residential solar and energy businesses. If Tesla gets the same 5.4% operating margin that  GM and Ford averaged last year, it would generate operating income of $1.1 billion. Subtract $200 million for interest expense and tax the remainder at 25%: The result is $700 million in net income, giving Tesla a multiple roughly 10 times bigger than GM and Ford.

The bottom line: "the company would have to quintuple the number of cars it sells, earn margins equivalent to those of its highly efficient competitors and not sell new shares." It is also priced to perfection: should any of these variables be adversely revised, be it lower sales, lower margin, lower selling price, and Tesla doesn’t come close to earning enough to get to 10 times the multiple of its bigger rivals by the end of 2018.

Oh well, as Grant concludes that just like during the dot com bubble, "valuation has never mattered before for Tesla’s investors and it may not matter at the end of next year. Shareholders may be willing to wait five years instead of two for Tesla to generate big profits, or they may continue to figure that valuation doesn’t matter for a game-changer like Tesla."

One thing is clear: the longer TSLA shareholders wait to take Musk to task, giving him the benfit of the doubt, the more tweets such as these will hit Musk' timeline, which instead of focusing on fundamentals...

... suggest that the genius inventor is more interested in even greater boondoggles and even more burned cash, even as Musk's personal vendetta with shorts and competitors grows. 

For now, judging by Tesla's record price, it's working.

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SloMoe's picture

At some point in the near future, it's going to be called a "Musk" not a "Ponzi"

svayambhu108's picture

sa-ti dai cu tesla în coaie 
^upvoted the above comment 

InjectTheVenom's picture

i'd rather let jerry sandusky babysit my 10-yr old son than buy TSLA stock at this insane valuation...thanx buy no thanx.

someone please wake me up when it's 100.  

InjectTheVenom's picture

 

>>>>  Ponzi scheme   OR

>>>>  Musk scheme

2_legs_bahhhhhd's picture

Paging Mr Musk to The courtesy phone,

You have a margin call from the American taxpayer.

silverer's picture

Maybe the union can accelerate Tesla's demise, and do everyone, especially the taxpayer, a big favor.

Still Losing Money's picture

how dare the union not buy fully into saint elon's glorious vision of the future utopia

post turtle saver's picture

meanwhile, I can order a Chevy Bolt now...

tick tock, Tesla...

BorisTheBlade's picture

Whatever Nicola Tesla did to deserve this fraduluent racket to be named after him.

Anteater's picture

No worries, mate, there are enough dupes who will put an $85,000 deposit on a Tesla truck, for Musk to pyramid the wages at Fremont and  Gohrmann, then get Trump MAGA tax credits to bail out the whole thing, as Tesla 3s flood the market with pyrotechnical battery failures, which Musk will bail out with the announcement of the new Tesla commuter gyrocopter that drops you off atvyour office, then returns as a UAV at your e-battery house, much like the Jetsons.

PrivetHedge's picture

To be fair they don't always burst into flame and burn your house down.

The cases I've seen were driving at the time.

Still Losing Money's picture

they don't always burst into flame and burn your house down. =YET

Ghostntheshell's picture

'It's the karma fisker all over again"

How does he factor in any down tick in auto sales this is a time bomb

Anteater's picture

Musk is reportedly researching a commuter gyrocopter that you fly to your office, then it returns as a UAV to your home on the 12th tee in the gated community you live in, because tele-commuting by VR is causing managers to vomit uncontrollably, when they remotely observe what their employees do with their time, when the boss is gone.

PrivetHedge's picture

The 'Musk' scheme will be the taxayer funded variant..

YHWH is greater's picture

Yes !  Blame German workers, it always ends well.

 

 

Still Losing Money's picture

maybe we should blame sex workers? no?

SoDamnMad's picture

And everyone bitches when auto production goes to Mexico. Let's all hear it. BITCH BITCH BITCH

SamEyeAm's picture

What's the per car subsidy from the tax payer for every Tesla? I think it's either $7,000 or $11,000 And this asshat still hasn't broken even yet? Time to pull ALL subsidies and let him shit the bed. None of this faggotry should be on the tax payer's heads.

People who can afford $50K+ cars don't need an innocent bystander's pay check at the point of Uncle Sham's gun to subsidize a demand that just isn't there at realistic prices.

silverer's picture

$7,000 or $11,000. If that's all it is, it's not enough.

SamEyeAm's picture

Just stay the hell out of my wallet for your dreams and aspirations.

Ecclesia Militans's picture

As unintuitive as it sounds, this comment is right on the money.  Given the radical impact this will have on transportation and the ideal fit for American society (our current interstate highway system, reliance on personal vehicles, etc.) then Tesla is a massive game changer, in concert with autonomous vehicle technology.  That subsidy may in fact be on the low side, as much as it irks me to admit it.

Anteater's picture

Please explain how a coal-burning vehicle of low-build quality with no AC-unit, that needs a new $35,000 battery every 70,000 miles, is a 'game changer', because I have a sawdust-powered car made out of 3D-printed aircraft balsa that's gonna be a  real 'disruptor'.

Iconoclast's picture

Hahahahahahaha, brilliant :-)

TradingTroll's picture

The cost will be far greater than just $7-11k per year.

How many more nuke plant meltdowns will it take? Unless Musk simultaneously decries nuke power, Musk's success will be an ELE.

No wonder he wants to move to Mars. In a prior life his soul sunk Atlantis. Now he will blow up the earth, even if just in a figurative sense.

not dead yet's picture

This guy is why Tesla stock is always riding high. Believes the pie in the sky BS. The other mfg have electrics in the pipeline and are taking their time because there is NO market for electrics. Even with huge tax incentives for buyers from both the fed and state the market is exceptionally tiny. When incentives are removed what few sales they have dry up. If the Tesla wasn't a status symbol Musk would be out of business by now. Electrics only have a future due to government mandates. Germany has proposed that no polluting cars be sold after 2030 and all will be off their roadways by 2050 without taking into account that the car may not pollute but the power source does as Germany is building a dozen new coal plants to replace their nukes. To meet US CAFE standards they will have to go to electrics which is the only thing driving the market, not Musk as the true believer idiots claim. If we took into account the line losses, as much as 50%, and the loss of juice in charging the battery electrics don't look too hot. We only gauge their mpg equivilent by the juice in the battery. With Trump proposing to lower the CAFE numbers it could be the death of the electric market depending on how much they get chopped. Other countries may follow suit. The electric buyers also pay no road use taxes so the fed and states may put taxes on the electrics for the lost revenue.

We also get the "yeah but" that Tesla is a slam dunk because of batteries, solar panels, and Powerwalls. When Musk announced the Powerwalls he claimed huge orders but we don't know if it was true or if it was losing money by the bucketfull Solar City placing orders hoping they could sell them. There is lots of established competition for the Powerwalls just as there are many major established competitors in the battery and solar markets. Musk lovers and incompetent reporters reporters play up Tesla's battery tech but the reality is Tesla has none. It's all Panasonic. It's Pansonic that is using it's tech and experience to set up Musks battery plant. They have also invested hundreds of millions in the plant too. They are making Powerwalls there with imported Panasonic cells even though the plant is only partially finished. Last fall Musk said he was going to the stock and debt markets to keep Tesla afloat and 2 days later claimed he no longer needed too. He got more Panasonic money, he didn't admit it but it's obvious, because later he announced Panasonic and Tesla were going to build batteries in a plant put up by the state of New York and given to Tesla for creating X number of jobs. The plant was originally supposed to be for Solar City to mfg their own solar panels instead of buying them. Any startup in this market is doomed but by making batteries instead of panels he gets the free plant and does not incur even bigger losses by making panels. If electrics do not take off these two battery plants are doomed.

PrivetHedge's picture

And people claim that America is a capitalist country.

silverer's picture

Money lent at near zero percent can take you to "dream come true" land. Problem is, it's temporary.

Volkodav's picture

       has he built anything that works yet?

       EROI on 50K plus car?

 

Bam_Man's picture

The stock will be up $50 tomorrow on this news.

Winston Churchill's picture

Will be great for TESLAs cashflow.Instead of burning through cash by losing money on every unit, Elon

can just turn the company into the first inter galactic bank.

He's a genius after all.

sirsmokum's picture

I almost can't wait for that point in the future where the exact details of the scam are plainly identified.

natashav's picture

Elon Musk = THE WELFARE QUEEN.

 

CTG_Sweden's picture

 

I´m not so sure that Tesla should have decided to produce the Model 3.

One problem with electric vehicles is that price discrimination gets harder. Price discrimination based on piston displacement and the number of cylinders have always made price discrimination easy for vehicles with internal combustion engines, especially in outside the US where fuel always has been more expensive. More piston displacement and more cylinders = a more expensive vehicle. Since the potential cost for a more powerful motor should be smaller for electric cars, price discrimination will probably to an increasing extent have to be based on other factors such as body size and a more luxurious interior. And if price discrimination based on body size is hard to accomplish (like in the US in the 1960s and 70s) the only principal remaining tangible factor is the perceived quality of the interior. That is probably one reason why the price span for American car manufacturers became so small during the post-war era. (Other factors, such as the high taxes for people with high incomes which were introduced during the Roosevelt administration probably also contributed to shrink the market for ultra-expensive cars in the US.)

 

Last of the Middle Class's picture

Let me get this straight, the lose thousands per car, spend billions of taxpayer money, lose billions more on an annual basis, maintain a stock price that values the company more than GM and want you to put your thousands into the market they control massively and openly with the expectation of making money in the future. You'd have to be an idiot not to see that that is some sort of VC ponzi and the whole thing is 2 or 3 decisions by people you can't even get in the room with from collapsing to fricking nothing. Same with UBER. These are guys who are not taking advantage of technology to make a company but are using technology to manufacture a market that doesn't even exist in the best of times.

not dead yet's picture

Musk is the new PT Barnum. Musk takes "orders" for his 3 with a grand down and refundable. Except for the true believers and the suckers in the media no one would call these firm orders. It's all PR and free publicity for if Musk wanted firm orders it would be 10 grand down and no refunds. Musk loses his ass selling cars that mostly sell from 80 to 160 grand and the suckers believe he can sell the 3, which is only slightly smaller than the S, for 35 grand which he claims is BEFORE the government handout. More free PR and it worked as very few question the sales projections or the cost and any that do get stomped on as dinosours or ignorant idiots. Every time he's about to get his ass handed to him he comes up with more "genius" insights and the fawning believers and press forget everything except Musk is a genius. His product announcements for September mean he's got disappointments coming and all will be forgiven after the unveiling of more pie in the sky. Odds are it will be the inevitable delays of the 3 production as only idiots believe his recent timetables for production. He doesn't even have a prototype built and yet hopes to go from prototype into production. Plus most of his machinery for mfg cannot be designed and built until the final design is set.

Sudden Debt's picture

will they make money on them or will they sell them yet again with a loss?

VWAndy's picture

 I he still looking for shorts to burn?

PrivetHedge's picture

The everyday story of a billionaire business owner screwing over his staff.

That makes him psychotic or Tribe then. What a loser.

Zarbo's picture

He's a certified  (?) genius.  Surely he can find a way out of a simple labor dispute.  /sarc /sarc

Iconoclast's picture

Makes no difference; tomorrow he announces time travel, a shuttle bus to Jupiter, that'll bend gravity so you come back younger than you left, an atomic battery the size of a golf ball, that'll power the personal jet (he'll be selling you on a 50 year lease at 150 quid a month) and your home wind turbine and solar panels.

And he will finally announce he's the son of God and all his acolyte fanbois will wank themselves to death in a jism death cult gathering. Oh and the stock will rise to $1000 making it the most valuable company ever.

SamEyeAm's picture

If you've already died and I put your remains on the shuttle bus to Jupiter, will you come back alive?

Iconoclast's picture

Lol. Shhh, it's in Elon's next presentation when he announces he's found another dimension to our existence.

ThanksIwillHaveAnother's picture

For JHC end forced union membership.   It ruined Milwaukee manufacting companies including Grohmann's Aluminum Casting and Engineering Company (ACE).  See https://www.immigrantentrepreneurship.org/entry.php?rec=150

adr's picture

The stock based compensation carrot doesn't work for people used to working for a living. Musk thinks Germans are idiots and will take less actual money for doing their job because he'll offer stock that costs him nothing. 

The idea that a company with a triple digit P/E can grow into its valuation in a low margin sector is insane. If the central bank printing press stops, Tesla doesn't stay above $100 let alone go to $500+.

Massive profit margin for Tesla? How? They lose tens of thousands on each car now, and a cheaper model is supposed to bring higher profits. 

So far everything about the Model 3 shows it to be a $50k electrified version of a Kia Rio. In fact the Kia Rio is a far better looking car with a much nicer interior. I sat in a Model X second row. I think Musk's inspiration for the seat was the lawn chairs Spirit airlines uses for seats. 

I wonder if the $35k Model 3 will come with crank windows? We already know it will have no range, any options, will not have supercharging capability, and will not have A/C. It also will not have a dashboard or any instrumentation other than the massive tablet stuck in between the seats. How the fuck is Musk getting that thing approved by the NHTSA? 

I'm sorry officer, I didn't know how fast I was going because my car has no speedometer and I can't figure out how to get it displayed on this stupid tablet. 

Bunga Bunga's picture

LOL, Tesla will end up like GM.

Ban KKiller's picture

Enron, I dunno....it just comes to mind.