its robots. This does not even take into account the expense associated with redoing assembly that robots couldn't get right in the rst place!\" Model is coming off the production line were defeo tive. According to the L4 Titties. \"Online Tesla forums are rife with comments from some of those lucky enough to have the car in hand. They're griping about dead batteries. leaking tail lamps. protruding head- lights. door rattles. and body panels that don't line up and in many cases. they've got photos to back it up?\" The delays and poor production quality are creating a cash problem for Tesla. It can't. sell cars it hasn't pro duccd. yet Bloomberg reported that the company spent nearly half a million dollars every hour of 2017. \"whether ITesIa] can last another to months or a year. [Musk] needs money. and quickly.\" said Kevin Tynan. a senior analyst with Biocmberg intelligence. Tynan esti- mated Tesla will be required to raise at least $2 billion in fresh. capital by mid~20ili.'\" Musk disagreed. meeting "Tesla will be protable 8L cash ow positive in ()3 3t 04 [2018]. so obviously no need to raise money."m Muslt's ambition has been praised in the past. but Tesla's worsening nancial position is raising more and more questions. The company has lost $4.6 billion since going public in 20m. MUSK l5 TRYING TO TAKE CONTROL Tesla's plan is to take greater control of its manufactur- ing line in order to increase production and reduce ex- penses. Musk admitted in 20th that Tesla overly relied on robots in production telling CBS. "...excessive auto mation at Tesla was a mistake. To be precise. my mis- take. Humans are underrated."'" Musk believes more humans need to oversee vehicle assembly. starting with him. The CEO is spending day and night at the Tesla factory {even sleeping in the conlerence room) so be can realize errors in production and solve them in real time.'"'l'esla employees may not be too thrilled. Musk describes himself not only as micromanager. but as a \"none-manager" [attriti- means a thousandth of some- thing. while n-ono means a billionth). \"l have [obses- sive-compulsive disorder] 0CD on product-reisted issues." he told The Wall Street Jam-nor. \"i always see what 's wrong I never see what's right ." 1'\" Musk says that direct oversight has allowed him to \"unlock some of the critical things that were holding [Teslal back."' His first move was to temporarily shut down the entire Model 3 production line in April 2018. Tesla's spokesperson termed the shutdown as \"planned downtime~ to 'impnove automation and systemically address bottlenecks in order to increase production rates?\" Critics believed Musk was wrong to put the line On hold. "Periodic shutdowns of hours or a day are not uncommon during prelaunch pilot build. They are unheard of in regular production. where [Musk] stlppos cdly is" said a former General Motors vice chairman. "3 Control Systems and Dulllty Management What Musk did not put on hold were his expecta- tions for production. Tesla committed to increasing production from 5,000 to 6.000 cars a week by June 20th. according to USA Today.'9'The investor commu- nity is skeptical ol'this lofty goal. especially since Musk has a history of failing to deliver. For example. he said in 20\" that Tesla wotdd churn out 5.000 Model 35 by year's end but only delivered 2.'.'I2)i1\"'5 Musk plans to get to 6.000 cars a week by producing them day and night. Tesla is adding another production shift at its manui'acturing plant. transitioning to 24;? operations. The company is hiring 400 workers a week for several weeks in order to cover this new shift!\" Some analysts don't think this is a wise move as most [1.5. auto plants at established automakers oniy oper- ate two eighlhour shifts. This is because supplying a plant with parts and keeping the equipment in peak operation is difcult when running around the clock. 1"There's diminishing returns when running 24H." said an executive analyst with CNNMoney. Running an addi- tional shift also has nancial implications for Tests. The additional hires will surely put more pressure on its nances.\"7 Musk's response is to tighten the purse strings else where. its is planning an audit to save expenses where possible. says The Detroit News. 'I have asked the Tesla nance team to comb through every expense world- wide. no matter how small. and out everything that doesn't have a strong value justication.\" he wrote in a 2018 e-mail to Tesla employees. "All capital or other expenditures above a million dollars. or where a set at related expenses may accumulate to a million dollars over the next [2 months. should be considered on hold until explicitly approved by me.\" salt! the CEO. 1\" Can Musk get Tesla under control before it runs out of' cash? FOR DISCUSSION Problem-Solving Penrperttve i. What is the underlying problem in this case from the perspective of CEO Eton Musk? 2. What are the causes of the problem? 3. What is your evaluation of Musk's approach for solv- ing the problem? Application oftopter Content 1. la Musk impiementing feedforward. concurrent. or feedback control to solve production issues? Explain. 2. Which areas of organizational control are part of Tesla's plan to remedy issues with the Model 3'? Pro vide examples. 3. Create a balanced scorecard to give Musk a view of Tesla. Utilize all four perspectives. CHAPTER 1! 619 4. What type ol'an audit is Musk utilizing? Explain. 5. Is Musk exhibiting the two core principles of total quality management? Why or why not? 6. Which barriers to control success are exhibited by Tesla'!I Provide examples. 1 Management in Action ls Tesla Out of Control? Tesla started in 2003 and specializes in electric cars, bat- tery energy storage. and solar panels. The company had more than 37.000 employees and revenues of over $11 billion in 201?. 1?; Tesla revolutionized the electric car in- dustry when it introduced the fully electric. plug-in Model S sports sedan in 2013. The Model S was named \"Car of the Century" by Car and Driver magazine in 2015.\"3 Tesla's Model S started at well over $70,000. with some models costing more than $100.000.\"' Tesla added a more affordable Model 3 at around $35,000 to its lineup in 2017. \"5 Tesla's nances struggled since introducing the Model 3. The company's net losses grew from $i'73 million in 2016 to $2.24 billion in 2011\"" Moody's downgraded the company's credit rating based on fears that it could run out of money by the end of 2018.\"?f What happened? TESLA'S MANUFACTURING PROBLEMS Manufacturing of the Model 3 has been \"hell." accord- ing to Musk. 173 The vehicle is taking too long to make, and it has a high defect rate. Tesla's production line couldn't keep up with the demand for approximately 400.000 Model 3s between 201? and 2018. The company has been operating out of 6'38 PART 6 Controlling a former GMfToyota joint venture plant in California with a capacity to produce 400,000 cars annually. Tesla could barely get a quarter of that production in 201? as it resorted to pulling cars off the production line and finishing them by hand.\"9 Tesla's production line is suffering from too much automation, according to Business Insider. Most car manufacturers automate stamping. painting. and weld- ing, but Musk decided to automate even more.15m He directed that final vehicle assembly, including putting parts inside the vehicle. be completed by robots. "It's remarkable how much can be done by just beating up robots adding additional robots at choke points and just making lines go really. really fast." he said in 2017.\"I To his surprise. automation actually slowed production. "Automation in final assembly doesn't work." said a Wall Street analyst. For example. Japanese carmakers actually limit automation because it is costly and negatively impacts quality.182 Tesla experienced this rsthand. Musk's robots couldn't get the nal assembly sequencing right, delaying assembly and prompting manual refinishes. ' E3 The robots also haven't saved the company any money. Tesla was able to reduce the number of workers on its production line due to automation. but it had to hire more expensive engineers to manage and program