Electric car manufacturer Tesla has asked suppliers to simply give it money back in order for the company to stay afloat According to the Wall Street Journal, a Tesla memo calls the payments “essential to Tesla’s continued operation.”
The Wall Street Journal reports that Tesla has asked some of its suppliers to refund the electric car company money that it previously used to purchase parts and supplies for vehicle production. According to a leaked memo, the company is requesting money back from suppliers to help the car company become profitable, as if this is the responsibility of the company’s suppliers. The company reportedly asked suppliers to return a “meaningful amount of money” from the companies payments since 2016.
The memo was sent by a Tesla global supply manager and described the monetary request as “essential to Tesla’s continued operation,” and “characterized it as an investment in the car company” according to the Journal. Tesla declined to comment on the memo, but did confirm that they have been seeking price reductions from suppliers for their recent projects.
Dennis Virag, a manufacturing consultant with over 40 years of experience in the industry, said that Tesla’s request could place suppliers in financial danger and could actually negatively affect Tesla’s future supply of car parts. “It’s simply ludicrous and it just shows that Tesla is desperate right now,” he said. “They’re worried about their profitability but they don’t care about their suppliers’ profitability.”
This latest news brings into further question Tesla’s cashflow issues which have reportedly become worse in recent years. The company is reportedly burning through approximately $1 billion a quarter and finished their first quarter with $2.7 billion available. The company promised to bring their expenditure down below $3 billion this year, the company burned through $3.4 billion last year. The companies loss in the first quarter was approximately $710 million, marking the fifth consecutive quarter of losses.
If Tesla’s stock doesn’t reach a conversion price of $560.64, the company will have to pay a $230 million convertible bond in November, and $920 million convertible note in March if the stock price doesn’t reach $359.87. Tesla stock has dropped by approximately 4.5 percent over the past 12 months and is down 3.86 percent today putting current stock price around $301.47.