Published: Wed, July 25, 2018
Markets | By Terence Owen

Tesla Reportedly Asked Suppliers for Cash Back to Show Profit

Tesla Reportedly Asked Suppliers for Cash Back to Show Profit

A Tesla spokesman told CNNMoney that it asked "fewer than 10" suppliers for money back for long-term projects that began in 2016 and have not yet been completed, The spokesman said the cost savings will help Tesla increase its production volume, though he claimed Tesla would be profitable without the concessions.

When a company asks suppliers to retroactively give money back, it's a sign that something has gone wrong. The 15-year-old company has reported only two quarterly profits in its history and has never made a profit for a full year.

"It's troubling", David Whiston, an analyst with Morningstar in Chicago, said in an interview on Monday as Tesla's stock declined, closing off 3.3 percent. While it's not clear which suppliers Tesla asked for cash back, or how much, the Wall Street Journal said the amount was "meaningful".

Tesla is due to report second-quarter earnings after the stock market closes on August 1.

"We still have the same concerns, though, about general cash flow needs for the company, production quality issues, automation or lack thereof, as well as concerns on profitability", Mr Osborne said.

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The race to get the Model 3 going may have added unexpected costs in the second quarter. The remainder of supplier discussions focus on future parts price or other changes that will help lower costs, he said. In the memo, Tesla described its plea as a way to invest in its company and ensure that it is able to continue ordering new parts in the future.

Tesla may have finally hit its production target of the Model 3, but the company is not yet out of the woods. As one manufacturing consultant who isn't involved with Tesla told the WSJ: "It's simply ludicrous and it just shows that Tesla is desperate right now".

The company experienced a similar shares fall last week, as a result of a tweet from Musk that labelled a British diver assisting in a rescue effort in Thailand as a "pedo guy".

Tesla was trading below $300 per share at the opening bell on Wall Street, losing over $2.3 billion off its market capitalization.

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