Is Tesla just months away from a total collapse?
11-30-17, 12:58 PM
#1
Lexus Fanatic
Thread Starter
Tesla employees claim 90% defect-rate on the assembly line.
I won't take sides in this argument, since I'm obviously not there to see what actually happens inside the plant (nor have I personally had the chance to test-drive many brand-new Teslas)...but here's an interesting He-Said/ She-Said contrast between what Tesla employees at the plant and company reps themselves say. (You can decide for yourselves who you want to believe...perhaps the truth is somewhere in between).
https://www.reuters.com/article/us-t...-idUSKBN1DT0N3
#BUSINESS NEWS
NOVEMBER 29, 2017 / 1:17 AM / UPDATED A DAY AGO
Build fast, fix later: speed hurts quality at Tesla, some workers say
Alexandria Sage
SAN FRANCISCO (Reuters) - After Tesla’s Model S sedans and Model X SUVs roll off the company’s Fremont, California assembly line, the electric vehicles usually make another stop - for repairs, nine current and former employees have told Reuters.
The luxury cars regularly require fixes before they can leave the factory, according to the workers. Quality checks have routinely revealed defects in more than 90 percent of Model S and Model X vehicles inspected after assembly, these individuals said, citing figures from Tesla’s internal tracking system as recently as October. Some of these people told Reuters of seeing problems as far back as 2012.
Tesla Inc (TSLA.O) said its quality control process is unusually rigorous, designed to flag and correct the tiniest imperfections. It declined to provide post-assembly defect rates to Reuters or comment on those cited by employees.
The world’s most efficient automakers, such as Toyota (7203.T), average post-manufacturing fixes on fewer than 10 percent of their cars, according to industry experts. Getting quality right during initial assembly is crucial, they said, because repairs waste time and money.
At Tesla “so much goes into rework after the car is done ... that’s where their money is being spent,” a former Tesla supervisor said.
The Silicon Valley automaker said the majority of its post-assembly defects are minor and resolved in a matter of minutes.
Tesla has enthralled consumers with sleek designs, clean technology and legendary acceleration on its pricey cars. A Consumer Reports survey found 91 percent of Tesla owners would buy again.
Still, the magazine and market researcher J.D. Power have dinged the company on quality, citing troubles such as faulty door handles and body panel gaps. Bernstein analyst A.M. (Toni) Sacconaghi, Jr. test-drove one of the company’s new Model 3 sedans earlier this month, writing that the fit and finish were “relatively poor.” Tesla owners have complained on web forums of annoying rattles, buggy software and poor seals that allow rainwater to seep into the interior or trunk.
Auto industry experts say the company’s survival now depends on its ability to crank out high-quality cars in volume as it begins to build its first mass-market car, the Model 3, which starts at $35,000.
Tesla has never turned an annual profit and is burning through $1 billion a quarter. That is unsustainable without fresh cash or a big increase in sales to mainstream customers who may prove less forgiving of potential defects.
“We’ve never doubted Tesla’s ability to make exciting products with top specifications, but there’s a difference between unveiling something and then actually making it perfectly in large volume. Tesla has not perfected the latter yet,” Morningstar analyst David Whiston wrote earlier this month.
Tesla Chief Executive Elon Musk has vowed the company would become “the best manufacturer on Earth,” helped by a new, highly automated assembly line and a simpler design for the Model 3. However, production woes have slowed deliveries of the much-anticipated sedan.
Snags are normal with any new launch. But chronic defects with Tesla’s established Models S and X show a company still struggling to master basic manufacturing, workers said.
Known as “kickbacks” within Tesla, these vehicles have glitches as minor as dents and scratches to more complex troubles such as malfunctioning seats. Easy fixes are made swiftly on the factory floor, workers said.
Trickier cases head to one of Tesla’s outdoor parking lots to await repair. The backlog in one of those two lots, dubbed the “yard,” has exceeded 2,000 vehicles at times, workers told Reuters.
Tesla denied to Reuters that such “repair lots” exist. FILE PHOTO: Model S side panels await installation at Tesla's factory in Fremont, California, June 22, 2012. REUTERS/Noah Berger/File Photo Reuters interviewed nine current and former Tesla employees, including a former senior manager, with experience in assembly, quality control and repairs on Model S and Model X. All requested anonymity because the company required them to sign non-disclosure agreements. Four of the people were fired for cause, including two last month as part of a mass dismissal of hundreds of workers for what Tesla said was poor performance. Sacked workers who spoke with Reuters denied they were poor performers.
People with knowledge of Tesla’s internal quality data shared those figures with Reuters. The news agency was unable to confirm the information independently.
Defects included “doors not closing, material trim, missing parts, all kinds of stuff. Loose objects, water leaks, you name it,” another former supervisor said. “We’ve been building a Model S since 2012. How do we still have water leaks?”
Tesla shares were down 3.4 percent to $306.60 in afternoon trading on Wednesday.
BUILD FAST, FIX LATER
Tesla disputed workers’ portrayal of the automaker as struggling to produce defect-free vehicles. A spokesperson described a rigorous process that requires all cars to pass more than 500 inspections and tests. Any reworking of cars after assembly reflects the company’s commitment to quality, the spokesperson said.
“Our goal is to produce perfect cars for every customer,” Tesla said in a statement. “Therefore, we review every vehicle for even the smallest refinement. Most customers would never notice the work that is done post production, but we care about even a fraction of a millimeter body gap difference or a slight paint gloss texture. We then feed these improvements back to production in a pursuit of perfection.”
Employees who worked on Model S and Model X described pressure to keep the assembly line moving, even when problems emerged. Some told of batches of cars being sent through with parts missing - windshields in one case, bumpers in another - because there were none on hand. The understanding, they said, was that these and other flaws would be fixed later.
Quality inspectors would sometimes find more defects than those reported by workers in the internal tracking system when a car came off the line. “We’d see two issues, that’s pretty good. But then we’d dig in and there would be like 15 or 20,” one person said.
One persistently tricky area was alignment, where body parts had to be “muscled,” in the words of the senior manager, to a certain degree of flushness. Not every team follows the same rule book, workers said, resulting in gaps of different size.
Tesla denied that its quality control is inconsistent and said its “extensive” process for locating and fixing errors was “very successful.”
Some workers traced the challenges to Musk’s determination to launch vehicles faster than the industry norm by shortening the design process, skipping some pre-production testing, then making improvements on the fly. Such improvisation leads to high repair rates, employees said.
For a March report called “Beyond the Hype,” J.D. Power found creaks, scratches and poor door alignment on new Model S and Model X vehicles, issues it blamed on the company’s lack of manufacturing experience. The overall quality of Tesla vehicles, it concluded, was “not competitive” within the luxury segment, lacking “precision and attention to detail.”
Such sloppiness is a rarity in luxury brands such as Mercedes-Benz (DAIGn.DE) and BMW (BMWG.DE), said Kathleen Rizk, director of global automotive consulting at J.D. Power.
“Those companies have been manufacturing forever,” she said. “They have stopgaps.”
Tesla said its high customer satisfaction proves it is building the “safest and best-performing cars available today.”
Reporting By Alexandria Sage; Editing by Peter Henderson and Marla Dickerson
https://www.reuters.com/article/us-t...-idUSKBN1DT0N3
#BUSINESS NEWS
NOVEMBER 29, 2017 / 1:17 AM / UPDATED A DAY AGO
Build fast, fix later: speed hurts quality at Tesla, some workers say
Alexandria Sage
SAN FRANCISCO (Reuters) - After Tesla’s Model S sedans and Model X SUVs roll off the company’s Fremont, California assembly line, the electric vehicles usually make another stop - for repairs, nine current and former employees have told Reuters.
The luxury cars regularly require fixes before they can leave the factory, according to the workers. Quality checks have routinely revealed defects in more than 90 percent of Model S and Model X vehicles inspected after assembly, these individuals said, citing figures from Tesla’s internal tracking system as recently as October. Some of these people told Reuters of seeing problems as far back as 2012.
Tesla Inc (TSLA.O) said its quality control process is unusually rigorous, designed to flag and correct the tiniest imperfections. It declined to provide post-assembly defect rates to Reuters or comment on those cited by employees.
The world’s most efficient automakers, such as Toyota (7203.T), average post-manufacturing fixes on fewer than 10 percent of their cars, according to industry experts. Getting quality right during initial assembly is crucial, they said, because repairs waste time and money.
At Tesla “so much goes into rework after the car is done ... that’s where their money is being spent,” a former Tesla supervisor said.
The Silicon Valley automaker said the majority of its post-assembly defects are minor and resolved in a matter of minutes.
Tesla has enthralled consumers with sleek designs, clean technology and legendary acceleration on its pricey cars. A Consumer Reports survey found 91 percent of Tesla owners would buy again.
Still, the magazine and market researcher J.D. Power have dinged the company on quality, citing troubles such as faulty door handles and body panel gaps. Bernstein analyst A.M. (Toni) Sacconaghi, Jr. test-drove one of the company’s new Model 3 sedans earlier this month, writing that the fit and finish were “relatively poor.” Tesla owners have complained on web forums of annoying rattles, buggy software and poor seals that allow rainwater to seep into the interior or trunk.
Auto industry experts say the company’s survival now depends on its ability to crank out high-quality cars in volume as it begins to build its first mass-market car, the Model 3, which starts at $35,000.
Tesla has never turned an annual profit and is burning through $1 billion a quarter. That is unsustainable without fresh cash or a big increase in sales to mainstream customers who may prove less forgiving of potential defects.
“We’ve never doubted Tesla’s ability to make exciting products with top specifications, but there’s a difference between unveiling something and then actually making it perfectly in large volume. Tesla has not perfected the latter yet,” Morningstar analyst David Whiston wrote earlier this month.
Tesla Chief Executive Elon Musk has vowed the company would become “the best manufacturer on Earth,” helped by a new, highly automated assembly line and a simpler design for the Model 3. However, production woes have slowed deliveries of the much-anticipated sedan.
Snags are normal with any new launch. But chronic defects with Tesla’s established Models S and X show a company still struggling to master basic manufacturing, workers said.
Known as “kickbacks” within Tesla, these vehicles have glitches as minor as dents and scratches to more complex troubles such as malfunctioning seats. Easy fixes are made swiftly on the factory floor, workers said.
Trickier cases head to one of Tesla’s outdoor parking lots to await repair. The backlog in one of those two lots, dubbed the “yard,” has exceeded 2,000 vehicles at times, workers told Reuters.
Tesla denied to Reuters that such “repair lots” exist. FILE PHOTO: Model S side panels await installation at Tesla's factory in Fremont, California, June 22, 2012. REUTERS/Noah Berger/File Photo Reuters interviewed nine current and former Tesla employees, including a former senior manager, with experience in assembly, quality control and repairs on Model S and Model X. All requested anonymity because the company required them to sign non-disclosure agreements. Four of the people were fired for cause, including two last month as part of a mass dismissal of hundreds of workers for what Tesla said was poor performance. Sacked workers who spoke with Reuters denied they were poor performers.
People with knowledge of Tesla’s internal quality data shared those figures with Reuters. The news agency was unable to confirm the information independently.
Defects included “doors not closing, material trim, missing parts, all kinds of stuff. Loose objects, water leaks, you name it,” another former supervisor said. “We’ve been building a Model S since 2012. How do we still have water leaks?”
Tesla shares were down 3.4 percent to $306.60 in afternoon trading on Wednesday.
BUILD FAST, FIX LATER
Tesla disputed workers’ portrayal of the automaker as struggling to produce defect-free vehicles. A spokesperson described a rigorous process that requires all cars to pass more than 500 inspections and tests. Any reworking of cars after assembly reflects the company’s commitment to quality, the spokesperson said.
“Our goal is to produce perfect cars for every customer,” Tesla said in a statement. “Therefore, we review every vehicle for even the smallest refinement. Most customers would never notice the work that is done post production, but we care about even a fraction of a millimeter body gap difference or a slight paint gloss texture. We then feed these improvements back to production in a pursuit of perfection.”
Employees who worked on Model S and Model X described pressure to keep the assembly line moving, even when problems emerged. Some told of batches of cars being sent through with parts missing - windshields in one case, bumpers in another - because there were none on hand. The understanding, they said, was that these and other flaws would be fixed later.
Quality inspectors would sometimes find more defects than those reported by workers in the internal tracking system when a car came off the line. “We’d see two issues, that’s pretty good. But then we’d dig in and there would be like 15 or 20,” one person said.
One persistently tricky area was alignment, where body parts had to be “muscled,” in the words of the senior manager, to a certain degree of flushness. Not every team follows the same rule book, workers said, resulting in gaps of different size.
Tesla denied that its quality control is inconsistent and said its “extensive” process for locating and fixing errors was “very successful.”
Some workers traced the challenges to Musk’s determination to launch vehicles faster than the industry norm by shortening the design process, skipping some pre-production testing, then making improvements on the fly. Such improvisation leads to high repair rates, employees said.
For a March report called “Beyond the Hype,” J.D. Power found creaks, scratches and poor door alignment on new Model S and Model X vehicles, issues it blamed on the company’s lack of manufacturing experience. The overall quality of Tesla vehicles, it concluded, was “not competitive” within the luxury segment, lacking “precision and attention to detail.”
Such sloppiness is a rarity in luxury brands such as Mercedes-Benz (DAIGn.DE) and BMW (BMWG.DE), said Kathleen Rizk, director of global automotive consulting at J.D. Power.
“Those companies have been manufacturing forever,” she said. “They have stopgaps.”
Tesla said its high customer satisfaction proves it is building the “safest and best-performing cars available today.”
Reporting By Alexandria Sage; Editing by Peter Henderson and Marla Dickerson
Last edited by mmarshall; 11-30-17 at 01:01 PM.
11-30-17, 01:11 PM
#2
wow 9 out of 10 has defects after assembly. yikes, i wonder if they removed some testing and inspection steps to improve the speed of their assembly line. and upwards of 2000 pending rework??? :smh: is Tesla going to be selling refurbs at a discounted priced? 
11-30-17, 01:36 PM
#3
One would be surprised at how many reworked parts are on cars from new. Body parts that have been sanded and repainted 2,3,4 times. Interior door panels that have holes drilled into the backside to add foam to fill voids. They all have rework teams, both at the parts plants, and the assembly plants. Just in time parts delivery means no extra parts. So plants then have to finish the car later, so it gets parked into a lot.
11-30-17, 01:39 PM
#4
Lexus Fanatic
Thread Starter
Well, according to the article, all of those defects don't necessarily get into the hands of customers. They find and repair as many of them as possible while the cars are still in the plant.
11-30-17, 04:54 PM
#5
Lexus Champion
Are we even comparing the same metrics? What Tesla considers a post production fix may be different versus Toyota. Need more context.
11-30-17, 04:56 PM
#6
And that is partially why their interiors are so simple, less parts, less complexity, less problems to occur.
It is definitely not news that a company at this early stage would have growing pains.
Their sales are based off hype, they are known as the "apple" of cars and that isn't a bad position to be in but that reputation can be lost quickly.
It is definitely not news that a company at this early stage would have growing pains.
Their sales are based off hype, they are known as the "apple" of cars and that isn't a bad position to be in but that reputation can be lost quickly.
11-30-17, 05:04 PM
#7
Lexus Champion
When you come from the tech world in Silicon Valley, like Musk has, you think anything's possible if you throw enough money and labor at it. But building cars on a mass scale is different than a bunch of code-writing geeks at a tech firm pumping themselves up on caffeine and dodge ball breaks.
The lesson that Musk has learned is that building cars on a mass scale takes a long time to learn. Any of the big brands, particularly the luxury brands like Lexus/German 3 and even the Koreans know this. You're actually dealing with physical hardware and nuts and bolts manufacturing. Great cars and I love how Musk kind of upset the electric industry with trying out his ideas. But to make a car like the 3, you still are looking at a physical plant and employees who may not appreciate being pushed beyond their limits and capabilities.
The lesson that Musk has learned is that building cars on a mass scale takes a long time to learn. Any of the big brands, particularly the luxury brands like Lexus/German 3 and even the Koreans know this. You're actually dealing with physical hardware and nuts and bolts manufacturing. Great cars and I love how Musk kind of upset the electric industry with trying out his ideas. But to make a car like the 3, you still are looking at a physical plant and employees who may not appreciate being pushed beyond their limits and capabilities.
Trending Topics
11-30-17, 08:19 PM
#8
Lexus Fanatic
iTrader: (20)
more of a click bait article... at least it says the company finds the defects and not the consumers!
11-30-17, 08:21 PM
#9
Lexus Fanatic
Thread Starter
03-28-18, 03:30 PM
#11
Lexus Test Driver
03-28-18, 04:16 PM
#12
Lexus Fanatic
Thread Starter
Bob Lutz has been predicting their imminent failure for the last couple of years. It's clear that are on borrowed time as an automaker, though they may survive as a battery or electronics firm.
03-28-18, 06:32 PM
#14
Lexus Fanatic
Thread Starter
I think, though, that the pundits are correct in that it will probably live on as a battery or electronics firm rather than as a genuine auto-maker.
03-28-18, 07:38 PM
#15
Lexus Champion
Talk of Tesla really burning up cash has been around since last fall.
From November 2017...
Source
From February 2018...
Source
From November 2017...
Tesla’s Burning Through Nearly Half a Million Dollars Every Hour
- By this calculation, Tesla would exhaust cash on Aug. 6
- Company says it has ample money to meet its production targets
...Over the past 12 months, the electric-car maker has been burning money at a clip of about $8,000 a minute (or $480,000 an hour), Bloomberg data show. At this pace, the company is on track to exhaust its current cash pile on Monday, Aug. 6. (At 2:17 a.m. New York time, if you really want to be precise.)
- By this calculation, Tesla would exhaust cash on Aug. 6
- Company says it has ample money to meet its production targets
...Over the past 12 months, the electric-car maker has been burning money at a clip of about $8,000 a minute (or $480,000 an hour), Bloomberg data show. At this pace, the company is on track to exhaust its current cash pile on Monday, Aug. 6. (At 2:17 a.m. New York time, if you really want to be precise.)
From February 2018...
1. How many Model 3s can Tesla actually produce?
The more affordable Model 3 sedan is the linchpin of Tesla’s attempt to transition from niche automaker to high-volume manufacturer, and the ramp-up so far has been muted. The first wave of cars has been delivered to paying customers, but Tesla has delayed targets several times to focus on quality and play whack-a-mole with several unspecified production bottlenecks at both its Gigafactory in Nevada and its assembly plant in California.
Tesla said in January that it expects a more gradual production ramp through the first quarter and intends to achieve the 5,000-per-week milestone by late June, three months later than previous guidance–and even that was already delayed a quarter. The company hasn’t yet clarified whether a 10,000-per-week run rate is still possible this year. When that question came up back in November, Musk answered with a 12-second pause.
The more affordable Model 3 sedan is the linchpin of Tesla’s attempt to transition from niche automaker to high-volume manufacturer, and the ramp-up so far has been muted. The first wave of cars has been delivered to paying customers, but Tesla has delayed targets several times to focus on quality and play whack-a-mole with several unspecified production bottlenecks at both its Gigafactory in Nevada and its assembly plant in California.
Tesla said in January that it expects a more gradual production ramp through the first quarter and intends to achieve the 5,000-per-week milestone by late June, three months later than previous guidance–and even that was already delayed a quarter. The company hasn’t yet clarified whether a 10,000-per-week run rate is still possible this year. When that question came up back in November, Musk answered with a 12-second pause.
2. How far off are the long-awaited updates to Tesla’s autonomous features?
Musk vowed to demonstrate a completely autonomous Los Angeles-to-New York trip by the end of 2017–a feat that hasn’t yet happened. Investors and enthusiasts alike know that the chief executive officer’s timelines are often overly aggressive. But with autonomous driving now as hot as electrification–General Motors Co. vehicles are improving fast, and Alphabet Inc.’s Waymo plans to start ferrying passengers in Phoenix this year–there will be renewed focus on Tesla’s driverless program.
Things have not been smooth within the Autopilot team at Tesla. Two leaders departed in roughly the past year, and staff has suffered from inevitable talent churn. It doesn’t help that Chris Lattner, who led the team from January 2017 until June, recently got his Model 3 and threw some shade via Twitter about lack of progress on Autopilot. Tesla also recently disclosed that it didn’t test any autonomous cars on California’s public roads last year, even as Waymo churned up more than 352,000 miles.
Musk vowed to demonstrate a completely autonomous Los Angeles-to-New York trip by the end of 2017–a feat that hasn’t yet happened. Investors and enthusiasts alike know that the chief executive officer’s timelines are often overly aggressive. But with autonomous driving now as hot as electrification–General Motors Co. vehicles are improving fast, and Alphabet Inc.’s Waymo plans to start ferrying passengers in Phoenix this year–there will be renewed focus on Tesla’s driverless program.
Things have not been smooth within the Autopilot team at Tesla. Two leaders departed in roughly the past year, and staff has suffered from inevitable talent churn. It doesn’t help that Chris Lattner, who led the team from January 2017 until June, recently got his Model 3 and threw some shade via Twitter about lack of progress on Autopilot. Tesla also recently disclosed that it didn’t test any autonomous cars on California’s public roads last year, even as Waymo churned up more than 352,000 miles.
3. Have customer deposits become a major revenue stream?
In an unusual way for automakers to raise cash, Tesla takes deposits from customers for products that have been unveiled but are not yet in production. That amounted to a staggering $686 million on the books at the end of the third quarter, much of that from down payments for the Model 3 sedan. And in November, Tesla unveiled not just one but two new vehicles: an electric Semi truck and a next-generation Roadster sports car.
Deposits for the Semi and the Roadster could add a further $300 million to Tesla’s working capital, according to UBS analyst Colin Langan, and clearing inventory could add $400 million. With reservations for the “Founders” series Roadster running at $250,000 each, could this be the moment when deposits approach $1 billion?
In an unusual way for automakers to raise cash, Tesla takes deposits from customers for products that have been unveiled but are not yet in production. That amounted to a staggering $686 million on the books at the end of the third quarter, much of that from down payments for the Model 3 sedan. And in November, Tesla unveiled not just one but two new vehicles: an electric Semi truck and a next-generation Roadster sports car.
Deposits for the Semi and the Roadster could add a further $300 million to Tesla’s working capital, according to UBS analyst Colin Langan, and clearing inventory could add $400 million. With reservations for the “Founders” series Roadster running at $250,000 each, could this be the moment when deposits approach $1 billion?
4. Is Tesla making any progress on getting into China?
5. How fast is all that cash burning?
Tesla was burning through $8,000 a minute last year, according to Bloomberg calculations, and the slower ramp-up of the Model 3 means there’s less cash coming in the door. But the company has always been creative about financing and just sold $546 million of auto lease-backed bonds. The question looming large for Wall Street: Just how long can Tesla go before it returns to the equity or debt markets? Most analysts expect a $2 billion to $3 billion capital raise sometime this year, though the forecast as to timing is still up in the air.
Tesla was burning through $8,000 a minute last year, according to Bloomberg calculations, and the slower ramp-up of the Model 3 means there’s less cash coming in the door. But the company has always been creative about financing and just sold $546 million of auto lease-backed bonds. The question looming large for Wall Street: Just how long can Tesla go before it returns to the equity or debt markets? Most analysts expect a $2 billion to $3 billion capital raise sometime this year, though the forecast as to timing is still up in the air.