
Tesla's Klaus Grohmann Ousted After Clash with CEO Musk - germinalphrase
http://www.reuters.com/article/us-tesla-germany-exclusive-idUSKBN17T2IY
======
chollida1
> Grohmann disagreed with Musk's demands to focus management attention on
> Tesla projects to the detriment of Grohmann Engineering's legacy clients,
> which included Tesla's direct German-based rivals Daimler (DAIGn.DE) and BMW
> (BMWG.DE), two sources familiar with the matter said.

I mean, how was this not brought up and made a settled point before Tesla
acquired his company? Big fan of Musk but this is on his shoulders. According
to reports, Telsa is already talking to other Grohmann customers, read their
competitors, on how to compensate them for breaking the contracts.

Now they are facing the same engineers they just acquired wanting to go on
strike.

I'd start to worry about how Tesla is going to fund Model 3 manufacturing,
buying out competitors from contracts that they don't want to fill, and how to
deal with a set of key employees who may want to unionize and certainly want
higher pay, but Tesla just somehow always seems to find a way.

The stock is close to its all time highs, and short interest is at the bottom
of its trailing year, so I guess I'm not the only one who has just thrown up
their hands and just let Elon have his way.

At what point does shorting Telsa join "starting a land war in Asia" as a rule
to live by:)

From Zero Hedge....

> The German labor union IG Metall has demanded that Tesla's management
> formalize multi-year job guarantees and increase salaries as a way to
> provide assurance amid management turmoil. The alternative is a strike which
> could lead to further "unexpected" delays for the Model 3, and even more
> hyperbolic statements from Musk on his twitter account to deflect attention
> from increasingly growing problems in Tesla's paradise.

~~~
colechristensen
All of these events seem predictable and even desirable. Part of the benefit
of acquiring Grohmann Engineering is depriving competitors of their services,
and the costs include buying out contracts and appeasing labor. Turnover at an
acquired company isn't unusual, nor is friction in the transition.

~~~
NathanKP
If Tesla was smart and gave these aquihired employees adequate golden
handcuffs and noncompete clauses then I agree. But if they didn't and key
employees just leave and use their expertise to start another company that
helps out the competitors again then Tesla will have played themselves.

~~~
snovv_crash
This isn't software that a team of 6 can replace in 6 months. This is stuff
like assembly lines, metallurgy treatments, the characteristics and quirks of
specific machines, and requirements of suppliers. These can't just be replaced
by a rogue team leaving.

~~~
williamscales
On the contrary. The rogue team leaving knows how to build and maintain the
assembly lines, invented the metallurgy treatments, designed and built the
machines, and created the supplier network themselves. Without the team, the
automated manufacturing business is probably not worth nearly as much. The
team can go elsewhere and repeat the feat.

~~~
snovv_crash
No, no they didn't. They inherited the machine, or bought it from someone
else. This isn't software engineering, where people bootstrap their compilers.

They signed exclusive contracts with suppliers.

They designed parts which took many iterations of surface finishes and
annealing schedules and tolerances to get right. Each iteration requires
months of turnaround time and $€£ in manufacturing costs.

Sure the team can go elsewhere. But it will take them almost as long to set it
up the second time around, and almost as much money.

------
leggomylibro
I sympathize with the guy. Big companies today will say to your face that they
own your soul, not just your labor on the clock, and act affronted when you
disagree.

This luminary was passionate about automation, and wanted to continue
fulfilling the purposes of his company which specializes in automation. His
intentions with regards to that were almost certainly abundantly clear at the
time of purchase. Tesla just figures, they're the owners now so it's their way
or the high way.

"I definitely did not depart because I had lost interest in working," had may
as well be printed on every business lawyers' card, because it's probably the
most common thing they hear in exit interviews. Your over-protective clawing
is costing you your workers, idiots!

------
jansan
IMHO this is despicable business behavior of Tesla. As someone who worked at a
very large European car supplier, I know that companies like Grohmann are
build with the help of the big players (car manufacturers or bigger
suppliers), who invest a lot of time and money to ensure that they get a
reliable supplier for the future. Our purchase department had special people
who helped several smaller companies in the Czech Republic to become suppliers
able to meet the requirements of European car manufacturers. They would have
never made it by themselves.

Tesla should not be surprised if Grohmann will see a tit for tat and run into
difficulties cooperating with other German suppliers, which they most
certainly rely on.

~~~
dtparr
I'm curious, what do you believe is the minimum level of help a company must
provide its suppliers in order to turn a competitor buying them out into
despicable business behavior? Is simply being a long-standing customer enough?
How long is a supplier that is provided help ethically required to continue
supplying?

~~~
jansan
In my personal opinion purchasing a long standing supplier of many companies
with the intention to remove it from the free marked is despicable already.

~~~
harshreality
I'm by no means a fan of pure capitalism, but in this case, what's the
problem? What you want doesn't look like a free market. What you want is an
external force (universal morality? government regulation?) prohibiting a
company (Grohmann) from being bought by a company (Tesla) that apparently
offered an enticing deal, and then trying to negotiate out of existing
contracts (has anyone accused Tesla of not honoring existing contracts? THAT
would be different). The stakeholders of Grohmann evidently wanted to sell,
and that's the only thing that matters in a free market. Once sold, Tesla
determines how Grohmann (re)negotiates with its customers, and how Grohmann
resources are utilized.

The companies Grohmann supplied have their existing contracts; if those
contracts are not honored, THAT will be despicable, and those companies will
then have legal recompense. If the contracts are negotiated away, there's no
problem. If contracts are honored but those companies don't like future
contracts (or lack thereof), that's on the other automakers for not forming a
consortium and buying Grohmann when they had the chance.

I view the labor issue as separate; labor's issues are only tangentially about
whether Tesla is supplying parts to other automakers. Their concerns are
primarily about the implications on salary, benefits, and particularly job
stability. Labor is always free to do anything that's legal under labor law to
improve or negotiate a better position, regardless of who owns Grohmann or to
what companies it supplies parts.

~~~
namlem
I think the problem with it is that it's essentially exploiting a flaw in
capitalism. The company would probably generate more total long term value if
it continued to service multiple companies, but Tesla wants to capture as much
of its production as possible. Humans aren't money optimizers, and almost
everyone has a buyout price. Because Tesla has so much money, they can gain a
competitive advantage by just buying out others. Tesla and the stakeholders of
the company they buy win, while the overall health of the industry loses. Now
all their other clients have to spend extra time and money to do what they
were previously paying Grohmann Engineering to do, either by finding a new
partner or doing it in house.

~~~
Heliosmaster
I'm more of the opinion that if the existing customers were concerned enough,
they could have found a better solution. Forming a consortium doesn't seem too
far off. Of course now i'm speculating with somebody else money, but I also
believe somebody run the numbers. Strategy is basically about running numbers
continuously about every possible scenario.

------
swalsh
This sounds familiar, reminds me of when Amazon acquired Kiva, they too had
rivals as customers. Amazon decided to slowly stop supporting existing
customers, and focus only on its internal operations.

I think the lesson here, for something as crucial as automation, you're taking
a risk when purchasing robots from vendors.

~~~
Animats
That was a shock to the material-handling industry. Vendors have gone out of
business before, but usually someone acquires the assets and services the
existing machinery. That didn't happen with Kiva. Existing Kiva customers were
no longer able to buy more Kiva robots. It's not even clear they can get
replacement parts. "Amazon Robotics ... encouraged prospective users of Kiva
technology to let Amazon Robotics and Amazon Services provide fulfillment
within Amazon warehouses using Amazon robots."

[1] [https://www.therobotreport.com/news/filling-the-void-left-
by...](https://www.therobotreport.com/news/filling-the-void-left-by-kiva-
systems-acquisition-by-amazon)

~~~
jacquesm
I predict a lot more attention to 'change of control' clauses in supply
contracts.

~~~
dnh44
It's standard practice already in at least one industry I know of.

------
speeq
Letter from Elon Musk to Tesla Grohmann employees (writing by Musk in English,
then translated into German and then back in English, Source:
[https://electrek.co/2017/04/27/tesla-advanced-automation-
mod...](https://electrek.co/2017/04/27/tesla-advanced-automation-
model-3-union-loses-popularity/) )

\---

Tesla Grohmann – Mail from Elon I am very grateful that last Thursday I had
the opportunity to talk to you and I wanted to give you some additional
thoughts.

Tesla is unlike most other companies. Unlike other companies, the existence of
Tesla is not only to make money. If it were only about this one goal, then I
can tell you that the founding of a completely new car manufacturer would
definitely not have been the smartest way. Our foundation and the foundation
of everything we do is to accelerate the advent of sustainable energy. The
welfare of our planet is in great danger, and in order to solve this problem,
we need a sustainable solar energy production, we need a sustainable way to
store the energy in stationary batteries and we need a sustainable way to
consume this energy with electric vehicles. It is critical of the future of
humanity to solve this problem – we all want a better world for future
generations.

Tesla has made a number of important steps towards achieving this mission in
the last 14 years of our existence, but none is more important and can make a
bigger difference than Model 3. For the first time ever, there will be an
electric vehicle that people can afford and which people love. When Tesla was
founded, no one thought that an electric vehicle could ever be more than a
golf cart. Today, Model S is the best-selling vehicle in its class. Model X is
fast to pick up and recently won a golden steering wheel. And Model 3 is on
the brink of production start – just one year after the most successful
product launch ever. After the Model 3, many other vehicle products will come,
for which Tesla Grohmann will play a key role. To name just a few, which have
already been publicly announced (there will be many more): We are developing
Model Y (an affordable mid-range SUV), a heavy-duty semitrailer, a pickup and
the next generation of the roadster sports car.

And these are only the cars. Tesla is about to launch a new solar roof into
the market that will completely change the importance of the use of solar
energy. Tesla will soon produce more batteries than the entire world has
produced in 2013. These batteries will enable everything to be operated with
sustainable energy, including the cars we manufacture. I was never more
optimistic about the future of Tesla. Although it is not what drives us, Tesla
has the real potential to be one of the most valuable companies in the world.

We bought Tesla Grohmann because we believe that Tesla Grohmann will play an
important role in creating this future. It is not enough to produce cool
products. To be successful, we need factories that are as good as the products
themselves.

This brings us to the current topics at Tesla Grohmann:

First, the question of trust and the longing of every employee for job
security. I understand that you are concerned about our decision to focus on
Tesla projects instead of serving external customers. We have made this
decision, because just so much work has to be done on critical Tesla projects.
We really have so much to do that we will be able to hire even more
extraordinary talents, and we plan not only an expansion of the team, but also
our production facility in Prüm. For all these reasons, I would like to assure
everyone at Tesla Grohmann that we will not be able to reduce our workforce in
the foreseeable future, Even after these five years, we are expecting further
growth at Tesla Grohmann and do not expect any personnel reductions. However,
we wanted to give you absolute security for a definite period of time. This is
a promise you can rely on and I will ensure that it is also formally
implemented.

Second, on remuneration. Last week, we announced that each employee at Tesla
Grohmann Tesla will receive shares worth 10,000 euros (US $ 10,000),
distributed quarterly over the next four years, and an immediate bonus of more
than 1,000 euros in cash. This is just the beginning for each Teammitgled. We
will also enter into discussions immediately with the works council to ensure
that the remuneration of each individual employee is competitive and
corresponds to the local cost of living. Of course, no one at Tesla Grohmann
should earn less than he can expect on the local labor market; Just as no one
would reasonably require the remuneration in Prüm to be as high as in cities
like Stuttgart or Munich, where the cost of living is much higher. In any
case, every Tesla Grohmann employee will have the chance to earn considerably
more salaries and shares than is usual in the industry and relative to the
cost of living in Prüm. Unlike other automotive manufacturers, each Tesla
employee receives Tesla shares in addition to salary. These shares can be
easily sold for money, but they also open up the possibility of earning much
more through stock appreciation. The tenfold increase in our share price over
the past five years has made our shareholding exceptionally profitable for our
Tesla employees. I firmly believe that we have the potential for a further
ten-fold increase over the next five to ten years. That would make a total
value of € 100,000 from the share of the share of € 10,000. Although we would
not recommend it to anyone, because it is very likely less worthwhile, all
those who would rather have a simple cash bonus, instead of the shares, would
demand 2,500 euros in cash every year. Tesla firmly believes that
extraordinary performance must be rewarded with additional cash and share
bonuses. So this is only the beginning.

Thirdly, it is clear that you would like to see more changes at the workplace.
At Tesla, we are proud to offer a pleasant, fair, and exciting work
environment. It is very important for me that you like to work every morning.
We have drawn up a long list of change measures to bring Tesla Grohmann to the
conditions at other Tesla locations, as well as changes that are specific to
Tesla Grohmann and which we are now trying to implement. This list will be
visible in all buildings visible to all. We will update the list on a regular
basis so that everyone can see what changes have already been made, which are
currently being implemented and which will be implemented soon. You should see
every week that improvements happen.

Finally, I know that IG Metall wants to bring the workforce of Tesla Grohmann
on the union line. I would like to share my thoughts with you. It is my firm
belief that the separation of the workplace into “executives” and “employees”
does not create a good working environment. We want to create a system of
equality without artificial barriers so that someone can start as a trainee
and one day lead the entire company. This is why we eliminate all the special
privileges of the executives. For example, everyone will have equal access to
parking, eating the same tables, and there will be no management offices. I am
convinced that managers should work at the forefront, in the same work
environment as the entire team. Even though I run the company myself, I still
do not have my own office and often moved my workplace to the most challenging
area in the factory and slept on the factory floor when there was a real
crisis. Managers should always take care of their team before they take care
of themselves – the supervisor is there to serve his team – not the other way
round.

As I said at the beginning, everything at Tesla serves our mission and I do
not believe that IG Metall is sharing our mission. They have publicly
announced in the press that electric cars do not take care of them. In
addition, they have a real conflict of interest because their top priority
will always be the members of the hugely established automotive manufacturers:
their potential of membership is much greater than at Tesla Grohmann.

I would like to thank you for all the contributions you have made to Grohmann
over the years. I look forward to what we can create as a tightly integrated
team together.

Elon

~~~
danderino
Tesla is not going to revolutionize energy through selling electric cars and
solar panels.

I find the idea pretty laughable.

------
prklmn
Model 3 deliveries rescheduled to sometime, eventually...

------
rm_-rf_slash
Unfortunately absent from this article was an assessment of Grohmann's
contributions to Tesla and the ramifications of his departure. Otherwise the
reader is left to assume for themselves who was in the right or wrong, and
whether it was a good or bad decision for Grohmann, Tesla, or both.

~~~
dsp1234
_absent from this article was an assessment of Grohmann 's contributions to
Tesla_

The second and third paragraph of the article explain who Grohmann is in
relation to Tesla:

 _counting on Grohmann Engineering 's automation and engineering expertise_

 _described Klaus Grohmann and the company he founded as a "world leader in
highly automated manufacturing"._

Later:

 _the workforce felt insecure about becoming so dependent on one client after
the founder 's departure._

The rift is explained throughout as being basically, should Grohmann
Engineering focus on Tesla above it's prior automative relationships with
Tesla competitors? Musk says yes, Grohmann says no.

And the last two paragraphs show what immediate effects Tesla is going to have
to deal with (compensating existing Grohmann customers, and pressure from the
German labor union)

------
alexandercrohde
Lowly tech gossip, nobody will look back in a year and say "I'm so glad I read
that article."

I wish there was no segment of HN that cared about this.

~~~
Declanomous
I don't care for the gossip, but I do appreciate the discussions it often
spurs in the HN comments. There are already a few good comments here, and
without this post we wouldn't have those comments.

~~~
kinkrtyavimoodh
I'd enjoy the discussion more if it didn't always for some reason beeline to
Tesla's stock price.

~~~
Declanomous
I think that is a function of Tesla being a publicly-traded company. I think
that's why a lot of discussions devolve towards what a companies relationship
to its shareholders actually is. A lot of people are clearly invested in the
performance of Tesla's stock, but Musk seems less concerned with the share
price of Tesla than some people find to be acceptable.

I think this is probably why people are constantly shorting Tesla. Why would
you expect a company run by a person who hardly seems to care about share
price to maintain its share price over the long run?

~~~
Applejinx
Because it's a dominance behavior.

I think the essence of this situation is, the stock market wants companies to
pander to its every whim, BUT the stock market also has a dim awareness that
this is trading off long-term success for short-term cash-in tactics. They
know what they want but they also know it is bad for them, they just can't
help themselves.

You could counter this by being fierce and stern and saying 'no, you must eat
your spinach before dessert!' and probably have some success, if your business
was based on hard-nosed determination. Amazon can do that, because they are
tougher than Wall Street and will do what's best for Amazon, garnering
respect.

Tesla's different. Musk's positioning is the foggy-eyed mystic, the guy with a
vision WAY beyond what anybody else dares to have. Whether or not this is true
this is how he has to behave. So, if Musk says things like 'ectually capital
isn't even real, so the share price doesn't matter, it just slightly affects
how fast we can roll out batteries and synergize with going to Mars', if it
was a normal company the stock market would go WHACK and it would be goodbye
Tesla.

Instead, since Musk is Musk and since the whole concept of Tesla/SpaceX is
based on that impossibly grand vision, the stock market sort of gets wide eyes
and goes quiet, and are careful not to cross Musk.

It's a type of dominance behavior. He doesn't have to yell at them: he acts
like they're BENEATH him, and since the stock market likes to go for short-
term thinking, technically they are. He can't go to Mars etc. while complying
with stock market expectations because his business would implode. So he does
it anyway and they interpret his arrogance as dominance, which it is.

Tesla, Amazon, and Uber each have their own type of dominance behaviors with
the stock market. Tesla is the visionary seeing the burning bush and unaware
of anything the stock market says, and they command awe. Amazon is the hard-
bargainer who understands what the stock market wants, but won't trade away
their own power, and they command respect. Uber just acts the way the stock
market wants to act, and they command love (from the stock market, at least:
maybe not from anything human!)

~~~
stupidhn
> _the stock market wants companies to pander to its every whim_

The market doesn't want anything, nor does it have any awareness.

> _Tesla 's different._

The Musks of the world are rare, but we've seen many captains of indsutry in
history.

> _and are careful not to cross Musk._

That's why it has massive short interest, right?

Tesla (the company) is great. TSLA (the financial instrument) is a hyped up
momo stock, detached from anything underlying. That's it. There's no magic.
Sorry.

