Panasonic has reportedly stated that it will stop solar cell production at Tesla’s New York “Gigafactory,” the latest sign of strain in the relationship between the two companies and a major blow for the Buffalo, New York, facility that is increasingly seen as a billion-dollar boondoggle for the state.
Reuters reports that Panasonic has announced that it plans to exit its solar cell production at Tesla’s New York Gigafactory, the latest sign of strain in the relationship between the two firms as Panasonic’s status as Tesla’s exclusive battery supplier is ending.
Tesla has reportedly informed New York that Panasonic’s withdrawal “has no bearing on Tesla’s current operations”, alleging that the company employs 1,500 people in the city of Buffalo. The company had committed to employe 1,460 people in the city and cleared that figure in April avoiding a $41 million penalty. The employee numbers reported at that time included Panasonic’s employees at the facility. Panasonic said in a statement that it would cease production at the Gigafactory by the end of May and exit the factory entirely be the end of September.
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This move comes as Panasonic rushes to divest unprofitable businesses as the company’s shift to component manufacturer from consumer electronics maker struggles to drive profitable growth. The move also displays the further strained partnership that Panasonic has with Tesla, which is set to begin diversifying its battery supplies to include South Korea’s LG Chem Ltd. and China’s Contemporary Amprerex Technology Ltd.
Panasonic plans to continue its automotive battery joint venture with Tesla in Nevada which reported its first-quarter profit recently after years of production issues. Low demand from Tesla has left Panasonic sending most of its solar cells overseas instead of selling them to Tesla for its Solar Roof as initially intended.
Tesla’s Buffalo plant has faced numerous scandals in recent years, Breitbart News reported in 2019 that a black former employee at the Tesla production plant claims that racial tensions at the factory grew to such a high degree that the lunchroom and an assembly line naturally segregated. He described the Buffalo factory as a “very racist place.”
In 2018, a “racially charged” message was reportedly found in a bathroom last year which resulted in Tesla managers putting together a “diversity meeting” which was reportedly unhelpful to the situation. Employees also claim that white workers were given preference for certain jobs. One black employee alleges that they applied for a promotion only to learn that they lost the job to a white female employee. Sometime later, a new black employee was hired to a similar position but on the night-shift and paid $6 less an hour.
Six black and Hispanic former workers at the Tesla plant in Buffalo filed discrimination complaints with the U.S. Equal Employment Opportunity Commission (EEOC) and the state Division of Human Rights following their employment at the factory. The employees allege that white employees were heard repeatedly using racial slurs and were promoted ahead of more qualified black and Hispanic workers.
In November 2019, Breitbart News reported that New York state officials wrote down more than $1 billion in economic development investments in various tech projects across upstate New York, including Tesla’s Buffalo solar-panel production factory. The Buffalo plant was first announced by Governor Andrew Cuomo (D) in 2013 as part of efforts to improve state economy with manufacturing facilities developed by the State University of New York’s Polytechnic Institute.
New York state spent $959 million to build and equip the Buffalo factory. The factory, along with other factories in Syracuse and Plattsburgh, is owned by the Fort Schuyler Management Corp. which is a nonprofit group led by officials from SUNY Poly and other state agencies.
According to financial statements posted on the Fort Schuyler website last month, the firm wrote down the value of Tesla’s Buffalo factory by $884 million and other high-tech projects by $311 million. In the documents, auditors wrote that after re-evaluating the terms of the facilities leases, they determined that the corporation “will not likely receive the direct financial benefits associated with ownership of the manufacturing facility and equipment.”
Fort Schuyler’s financial statements that cover the fiscal year which ended on June 30 2018, valued the group’s land, real estate, and equipment at around $94.8 million, down from $1.2 billion in 2017. State officials said that the write-downs were an accounting charge but many believe that the facilities have provided very little value to the taxpayers whose money built them.
E.J. McMahon, the research director of the fiscally conservative think-tank Empire Center for Public Policy, stated: “This is black and white evidence that they wasted $1.2 billion of taxpayer money.” In February of 2019, Breitbart News reported that former employees at the Gigafactory II facility stated that equipment at the facility regularly broke down resulting in production goals never being met and some employees spending more time on their cell phones than working.
One employee reportedly raised issues about this with management and was told that Tesla was trying to “build the plane as we’re trying to fly it,” and to expect many hiccups at a start-up company. Dale Witherell, one of the 50 employees laid off by Tesla recently, commented on the company’s practices saying: “I don’t know how Gigafactory II has been going on this long without any checks and balances or any government officials or politicians actually monitoring or watching and holding them to some standards.”
Tesla responded to some claims by former employees stating: “As we’ve said, Solar Roof is a product that needs to last decades, and therefore has a long development cycle, and we’ve been thoughtful and deliberate as we gradually ramped production,” a spokesperson said. “We understand that job cuts like those we announced two weeks ago are never easy, and we are grateful to everyone who departed for their contributions to Tesla’s mission.”
Tesla reported a 21 percent decrease in installed solar systems for the fourth quarter which appeared to add to the lack of production at the facility. Dale Witherell and another worker, Dennis Scott, saw the slow production rate at the factory firsthand: “We’re paid for 12 hours to work, not watch movies,” Scott said. Witherell added: “During my employment there, nothing improved during the entire employment as far as production.”
Witherell continued to say: “Some weeks we produced enough solar modules for zero homes and probably the best I saw was maybe four homes in a week, so that is alarmingly scary to obviously be a part of a company who doesn’t have any sense of urgency to tackle these issues and get them working correctly.” Scott himself questioned the decision to invest $750 million into the firm saying: “That $750 million could have been spread out a lot better to a lot of other companies to stay here in Buffalo than sinking it into one big company.”
In November, Tesla provided members of the media with a tour of the Buffalo facility which was extremely controlled, with no cameras allowed and employees being handpicked by Tesla to speak to reporters. “It was all fabricated for show,” Witherell said. “There was no actual production that day so some of the teams in their specific area were instructed to make sure they looked busy and they actually were working on the same module over and over again.”
It was around this time that Tesla and state officials claimed that 800 people were employed at the plant, 400 by Tesla and 400 by Panasonic, but some workers have disputed these figures. “If you took all of our shifts, there are about 50 people, maybe 60 people at best per shift, there are four shifts,” Scott said. “You do the math. Are you going to tell me there are 200 people up in the front office?”