Tesla Inc. asked some suppliers to return a portion of its payments to them in an attempt by the electric-car maker to turn a profit, the Wall Street Journal reported, citing a memo sent to a supplier last week.

The company, whose eroding cash position has alarmed investors, requested a "meaningful" amount of payments made since 2016 to be returned, according to the letter. The note stated all suppliers had been asked to help the Californian company become profitable.

The request indicates more struggles for Tesla in its quest to reverse losses. While Chief Executive Officer Elon Musk proclaimed a "real" carmaker after hitting a weekly goal of producing more than 5,000 mass-market Model 3s, there are doubts the volumes can be sustained. Some of the increased output, pivotal for boosting revenue and earnings, came from a makeshift tent.

The U.S. auto manufacturer declined to comment on the specific memo, but confirmed it’s seeking price reductions from suppliers for projects, some of which go back to 2016, according to the report. Tesla called such requests a standard part of procurement negotiations to improve its competitive advantage, especially as it increases Model 3 production, the Journal said.

Money Back

It’s not clear how many suppliers were asked to hand back money, with some saying they weren’t aware of the request, the newspaper said. Panasonic Corp, Magna International Inc,

Continental AG and Robert Bosch GmbH are among Tesla’s suppliers, according to data compiled by Bloomberg.

It’s not so unusual for carmakers to ask suppliers for discounts retroactively, and some Japanese automakers have done it before, said Tatsuo Yoshida, an analyst at Sawakami Asset Management Inc. in Tokyo, who worked at Nissan Motor Co. between 1983 and 1999.

Tesla probably has some leverage to gain suppliers’ support, given that the type of parts it uses is probably a bit different from other automakers and it may even be the only customer in some cases, said Koji Endo, an auto analyst at SBI Securities Co. in Tokyo. "If Tesla goes bankrupt, those suppliers lose everything."

Tesla’s Australia and Asia media office, as well as a spokesman and spokeswoman in the U.S., didn’t reply to emails seeking comment on the Journal report.

QUESTION 

"Panasonic Corp, Magna International Inc, Continental AG and Robert Bosch GmbH are among Tesla’s suppliers, according to data compiled by Bloomberg." Discuss the process that Tesla followed to arrive at these suppliers. In relation with (a) identifying possible suppliers (b) pre-screening to reject unsuitable suppliers (c) conducting research on suitable suppliers (d) choosing the assessment method and analyse the supplier (e) selecting the supplier (f) on-going measurement of supplier performance (f) supplier accreditation.

Answer rating: 100% (QA)

Tesla has written a letter to all its supplier to return a portion of the payment that was made to them since 2016 It is an appeal to save the Company ... View the full answer