
Tesla employees say automaker produces flawed parts requiring costly rework - ilamont
https://www.cnbc.com/2018/03/14/tesla-manufacturing-high-volume-of-flawed-parts-employees.html
======
csours
Disclaimer up front: I work for a Tesla competitor.

Tesla is making several very interesting bets on the Model 3.

 _Bet 1: Model 3 mix -_ Tesla is betting that the ratio of expensive, high-
content Model 3s to cheap, low-content Model 3s will be sufficient to make
enough money to offset investments and pay back loans.

It will not be sufficient to make a small profit on each Model 3 sold given
the debt load that Tesla has accrued, so they will want to sell a good ratio
of expensive Model 3s.

If it takes to long to produce the cheaper Model 3s, Tesla will lose some
potential customers. Many investors are looking at that "top line" right now -
the number of customers and potential customers. If the top line moves too
much, investors may get spooked.

 _Bet 2: Vertical Integration -_ Most automakers rely on a web of parts
suppliers, who are under enormous pressure to reduce costs, but Tesla produces
most of its components in-house. The contract with an external parts suppliers
ensures that the supplier is responsible for any re-work or replacement of
defective parts. This allows the automaker to concentrate on internal
production issues.

Tesla's bet is that internal production of parts will lead to better and
cheaper components. This has not worked for any other automaker.

Traditional OEMs shoot for a mix of components where the internally produced
components are part of the company's core competence: Body Shells, Engines,
Transmissions - and externally produced components may be generic - switches,
latches, seats, frames, tires, wheels, etc.

If Tesla spends too much capital on component manufacturing, they will be
inefficient and investors pressure them.

Additionally and probably more importantly, if Tesla is not able to spend the
time and attention to iterate on cost and quality of these parts, it will also
lose this bet.

Personal opinion: I think Tesla has learned the wrong lesson from previous
dealings with suppliers. For instance, the original Roadster was designed with
a two speed transmission. A supplier claimed they could make it, but it never
really worked. Tesla learned the lesson that suppliers are stupid and suck at
making new things - I think they should have learned that lesson that it is
_really really hard to make new things_.

 _Bet 3: Automation -_ But first a detour - There are 3 main areas of auto
assembly, and most manufacturers have already fully or almost fully automated
2 of them: Body Shop (welding and assembly of the body shell) and Paint Shop.
The 3rd area is General Assembly.

General Assembly is the bloody, thorny, devilish poster child for multiple
single points of failure. A high feature vehicle may have on the order of 1000
assembly stations (aka footprints) in General Assembly. The Model 3 is
designed with much lower complexity in mind, and may only have 100 footprints.

If and when any of those 100 footprints has an equipment failure or parts
issue, _ALL 100 stop running_ in a short amount of time. Human assembly
workers are rather resilient and can figure out a multitude of small issues on
each and every operation. This may allow for a hypothetical variation of 5% in
non-critical parts.

Automated assembly may only allow for a 1% variation.

Additionally, automated assembly only runs well when EVERYTHING is designed
for automation. That is not impossible, but it is expensive and time
consuming.

\---

Most importantly, these three bets are linked:

If not enough base models are sold, the cost of design and equipment spending
will be excessive on a per vehicle basis.

If internally produced parts are too far out of spec, you have strong negative
impacts on automation.

If automation fails, you cannot produce enough vehicles at a low enough price
to satisfy your low-end customers.

But, if Tesla wins _all three_ bets, they win big time.

~~~
chiph
> Additionally, automated assembly only runs well when EVERYTHING is designed
> for automation. That is not impossible, but it is expensive and time
> consuming.

Designing for automation can have unexpected benefits. Many years ago IBM sold
a dot-matrix printer called the "ProPrinter". It was to be built on a new
automated assembly line in Charlotte NC, so all the parts were designed to be
easy to snap together, with no screws or fasteners.

Well, the robotic assembly line never really got going, so they hired a bunch
of temp workers to sit in front of tables and put them together. And it turned
out that the design was excellent for a group of recently-hired humans with no
experience to assemble.

This video shows the assembly (you can skip the first bit) in under 3.5
minutes:

[https://www.youtube.com/watch?v=spDYSKl3kmo](https://www.youtube.com/watch?v=spDYSKl3kmo)

~~~
csours
Neat video. Design for Manufacturability is closely related to Design for
Automation.

[https://en.wikipedia.org/wiki/Design_for_manufacturability](https://en.wikipedia.org/wiki/Design_for_manufacturability)

------
sweden
Sensanionalist article. So Tesla makes sure to manually fix flaws in the parts
of cars that are manufactured before using them. Sounds like every
manufacturing line ever.

Is it an efficient manufacturing process? Probably not but I don't see how the
end costumer should care about this. The problems in the manufacturing line
are already well known and commented by Elon Musk. This is a company that have
been mass producing cars for only 5 years, it's normal that they are still
catching up with the process.

~~~
kazen44
> This is a company that have been mass producing cars for only 5 years, it's
> normal that they are still catching up with the process.

this, getting a production line optimized can take years, especially if you
are relatively new to the field and the company has little instituted
knowledge at hand.

I know in Europe for instance, many plants that fabricate parts for the big
three have been doing so since the early 50's, and thus have an amazing body
of knowledge on what works and what doesn't in terms or producing high quality
parts in high numbers. Tesla does not seem to really have this knowledge.

~~~
foepys
Tesla tried to buy that knowledge by aquiring German robotics specialist
Grohmann. When the acquisition was complete, Tesla in classic startup fashion
tried to pressure employees into overtime and to cut all obligations Grohmann
had to other, mostly German, car manufacturers. This resulted in Grohmann's
CEO leaving the company in protest and unions threatening strikes. I image
quite a few top execs and engineers left with the CEO and went to VW, BMW, and
Daimler. Even lower level employees leaving would be hard on Tesla as those
people, despite "just" doing blue-collar work, are highly trained specialists.

~~~
gmueckl
The overtime claim csme up a whule ago already and back then I could not find
a supporting source. There was a payment negotiation shortly after Grohmann
was bought, but thay did not seem out of the ordinary, either. Remember that
Grohmann is a German company operating under German law, which is very
different from U.S. labor laws.

------
kryptiskt
What turned me pessimistic about Tesla was this piece of news from a month
ago: "During a conference call following the released of the company’s
financial results today, Tesla confirmed that its President of Sales and
Services, Jon McNeill, is leaving the company. Home Solar Power Tesla CEO Elon
Musk confirmed that Sales and Services will be reporting to him directly
without any plan for someone to replace McNeill."
[https://electrek.co/2018/02/07/tesla-president-sales-
service...](https://electrek.co/2018/02/07/tesla-president-sales-service-elon-
musk/)

If Musk can't let go of the micromanagement, Tesla isn't going to scale.

------
RivieraKid
I've been a long time fan, then sceptical fan and now I think Tesla will
probably fail in some way (such as being bought by a competitor).

What convinced me was following @TeslaCharts on Twitter. For example, here's a
recent series of tweets:
[https://twitter.com/TeslaCharts/status/974087889997975552](https://twitter.com/TeslaCharts/status/974087889997975552)

Having followed both the bullish and bearish sides, the bearish one is more
convincing.

What is confusing about this company is that they make (in some aspects) a
great, unique and innovative product but on the other hand they're in a very
bad financial situation, have production and quality issues and their CEO
tends to bullshit.

------
obblekk
For those catching up on Tesla news - there's a PR war going on between Tesla
Inc. and many hedge funds who are short TSLA stock. As a result, it's tough to
tell what's truth and what's imaginary.

Tesla wants people to believe in them in order to continue selling cars to
customers (who probably wouldn't buy if they thought the company was going
bankrupt) and stock/bonds already issued to investors.

Short sellers want to give people doubt to cause a decrease in stock price in
order to benefit from their short position.

Both parties are probably acting in good faith - Tesla wants people to see how
good they are and short sellers want people to see how risky they are. But as
a result the news is crowded and it's generally hard to know the truth.

Just remember, in the US the Supreme Court has ruled that it's legal for news
publications to lie to their readers/viewers.

~~~
dragontamer
You've missed one important group: union forces. Tesla Employees have been
fired en-mass in what was allegedly a union-busting attempt. Since Tesla
employees are unhappy, a lot of them are demonstrating flaws with Tesla's
manufacturing process, potentially in an attempt to strongarm their bosses
into getting better pay or unionization prospects.

Anyway, there's more than just "bulls vs bears" going on here.

In any case, Elon Musk's 20,000 Model 3 manufactured per month target for late
2017 is incredibly late (See:
[https://twitter.com/elonmusk/status/881757617416056832](https://twitter.com/elonmusk/status/881757617416056832)).
A lot of Tesla bulls don't seem to care however and continue to throw money at
the company.

Tesla isn't even at 2000 cars a month, and we're well into 2018. A lot of
people are interested in "why" this is happening. Yes, short-sellers are
interested, but I'm sure normal investors are wondering why Musk isn't even
hitting 10% of his target months later.

The article suggests that the QA group is finding flaws in the manufacturing
process. So... yeah. That makes sense for why the Model 3 is late with very,
very low production numbers. There's been a lot of speculation in different
groups for the failure, but ultimately, the core is that Tesla is not making
enough Model 3.

~~~
mephitix
>> Since Tesla employees are unhappy, a lot of them are demonstrating flaws
with Tesla's manufacturing process, potentially in an attempt to strongarm
their bosses into getting better pay or unionization prospects

This seems like a pretty big/dangerous jump to make with little-to-no
evidence.

>> In any case, Elon Musk's 20,000 Model 3 manufactured per month target for
late 2017 is incredibly late (See:
[https://twitter.com/elonmusk/status/881757617416056832](https://twitter.com/elonmusk/status/881757617416056832)).
A lot of Tesla bulls don't seem to care however and continue to throw money at
the company.

I _really_ hate that Musk publicly underestimates the amount of work and
deadlines in this process. It's especially annoying for me because I've worked
for people who publicly underestimate and it put way more ridiculous work on
me and my coworkers.

That said, I also hate this "fraud-boy" FUD. I think Tesla could eventually
pull this off. The ramp will obviously be slower than what Musk expects. I,
like many bears, take what Elon says with a grain of salt. But cars are
rolling off the production line. At this point, the Model 3 is now the best-
selling EV in the US. ([https://www.bloomberg.com/graphics/2018-tesla-
tracker/](https://www.bloomberg.com/graphics/2018-tesla-tracker/)). Tesla has
proven itself with the Model S. People in general love the cars. Tesla will
get there, and I think that's why bulls are holding.

~~~
dragontamer
> This seems like a pretty big/dangerous jump to make with little-to-no
> evidence.

Sorry for the lack of evidence.

[https://www.usatoday.com/story/money/cars/2016/05/19/united-...](https://www.usatoday.com/story/money/cars/2016/05/19/united-
auto-worker-uaw-tesla-motors/84585682/)

[https://www.mercurynews.com/2017/02/09/tesla-worker-long-
hou...](https://www.mercurynews.com/2017/02/09/tesla-worker-long-hours-low-
pay-and-unsafe-conditions/)

But its no small secret that pro-union forces are also in this whole mess.
I've got no skin in the game, but its clear that the UAW union wants to
unionize Tesla's workers.

The UAW rallying pro-union forces of the Tesla workforce is just... how
politics works in the USA. Its going to happen.

I'm overall a Tesla Bear (but I have no real money on this bet, its just my
unfathomed opinion). But when I read Tesla news stories, they're either
complaints about the workforce (which I generally judge to be from pro-Union
forces), or complaints about Tesla's financials (which I judge to be from
Financial bears).

That's all I'm saying: keep an eye out for the union pieces. They may or may
not be "correct", but there's certainly an agenda that is being pushed here.

------
cerved
The Machine That Changed the World largely attributes Toyotas success to
avoiding costly repair/rework, it's a phenomenal book.

~~~
geerlingguy
And if you’re arguing over things like supplier management, inventory
management, rework due to QA issues, European vs US vs Japanese manufacturing
philosophies and efficiencies, and _haven’t_ read this book, you should. It’s
basically a foundation for modern automotive manufacturing discussion (though
slightly dated now, as it was written in the 90s).

------
ggg9990
When my friend bought a model S I went over to drive it and found that it’s
one of the shittiest feeling cars in that price bracket (buttons doors etc)
but as soon as you get your foot on the “gas” pedal it’s the best car I’ve
ever experienced.

------
empath75
It’s interesting that Tesla is seen is a technology company and tech companies
are almost obsessive about applying Japanese auto manufacturing techniques to
software development, but Tesla has managed to get this so wrong. Small batch
production, obsessive quality control at all steps of production, etc, it’s
all straight out of The Goal or The Phoenix Project.

------
ctur
This rings true to anyone who has owned a Tesla, especially if they purchased
it when the model was new. Repeated trips to get minor things fixed is not
uncommon.

Nonetheless, they are excellent cars and worth the early adopter frustration
(IMO).

------
Animats
These are the problems Detroit had before Toyota forced them to get their act
together.

------
exabrial
Flagged because of the quotes in the article. If hacker news is going to make
accusations, can we at least base them on, you know, facts. If we can't do
that can we at least base them on statistics?

------
mdekkers
_Luxury automaker Tesla is manufacturing a surprisingly high ratio of flawed
parts and vehicles_

I laughed at this opening line of the article. Tesla isn't a "luxury
automaker". It is all cheap, badly fitting plastic inside, and sitting down in
any Tesla doesn't feel (to me) like any kind of "luxury" experience. Tesla is
"expensive", not "luxury". I get that they have to pay for the tech and
innovation, but when I drop over 100k EUR for a car, I expect a certain
overall experience, not feeling like I am sitting in a collection of the
cheapest possible parts.

