Tesla Asks Suppliers for Money to Sustain Production

Alicia Cross
July 25, 2018

The Wall Street Journal reports that Tesla has asked some of its suppliers to refund the electric auto company money that it previously used to purchase parts and supplies for vehicle production.

The electric carmaker reportedly asked select suppliers to return part of the money it paid them for past work to help the company reach profitability, the Wall Street Journal reports.

Telsa took another financial hit on Monday, with shares in the company dropping nearly 5% after the electric automaker was reported to have asked some U.S. suppliers to return payments to the money-losing company.

The leak came soon after Tesla announced it was cutting several thousand jobs as part of an effort to reduce costs. As investors started to get restless, Musk kept on making grand promises for future Tesla models and new Model 3 versions, which probably only added investor annoyance.

Tesla's rally call was aimed at all suppliers, although in the memo it was not made clear how they were expected to comply with the company's request for refunds. The company spends about $1 billion a quarter, and its stock price has declined by about 4.5 percent over the course of the a year ago.

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"It's troubling", David Whiston, an analyst with Morningstar in Chicago, said in an interview on Monday as Tesla's stock declined, closing off 3.3 percent.

Concerns about Tesla's cash situation became top of mind once again on Monday when it was reported that the company had requested retroactive refunds from a handful of suppliers to improve its financial situation. While Musk has said the company does not need to raise cash this year, several analysts have predicted that the electric vehicle maker would need to raise capital soon.

An analyst at Baillie Gifford, Tesla's third-largest institutional shareholder, told the Journal the firm is "divided" on whether Musk is the right leader for Tesla.

Becoming cash-flow positive is the primary goal of Chief Executive, Elon Musk, who said he wants to avoid raising additional cash, and turn a profit in the second half of the year. "It would not be correct to apply historical cost savings to current quarter".

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