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Tesla: inspirational company email

April 17, 2018

email… a mild warning sign? IMO rather a sign of more cash burn. I’m giving this one a 4.0 on the Richter scale. Link to the email below:

https://electrek.co/2018/04/17/tesla-model-3-production-goal-6000-units-per-week/


The headline of the email reads “Progress, Precision and Profit”. Translation: Faster, Better, Cheaper. That appears to be the order of priority.

There’s a nasty special variant of the better-cheaper-faster rule. Normally it’s 2 out of 3, if you try for all 3, you get none. The variant is when you’re behind and trying to catch up, facing not only an increased amount of work left in the same time, but also the likelyhood of your future estimates being under, considering your estimates up to this point were under. So when a project is behind, you only get to pick 1 out of 3. If you pick more than one, you get none. Is this the case with the Model 3 manufacturing?

Musk is going for faster. As long as everyone is clear on that, it should be fine. I think they have a good shot at making their production goals, in which case there’ll be much praise and much credit availability.


Highlighting some points:

(1) going to fire suppliers who can’t deliver at 6000/month rate … ok. You go to a new supplier and quote a job on super short notice, with everyone knowing you’re squeezed for time? Here’s what will happen – anyone who gives you the quote you want is desperate and BSing you. Anyone who’s competent will drag out the quote process knowing that you’ll pay anything once you’re down to your last month of slack in the timeline. Anyone who’s already your supplier will offer “expediting fees” and so on to actually do what you want. Translation: we are prepared to pay $$ to speed up our suppliers.

(2) tighten tolerances to 10x industry standards. Translation A: directly throwing $$ at the problem. If they already tooled up their production, tho, and it is the production equipment which is driving the design changes, then the alternative may be even more costly. In any case, reliable designs and cost-effective designs both have to breathe to take up variation, figuring this out is at least half the work of the design engineering, and far more than the effort it takes to realize function/performance. Applies to both the product and the tooling/automation. Translation B: Design is not completely finished. Tooling/Automation not reliable across batches of parts. This is common, however, everyone goes thru this phase. Batch adjustment is an ok way to build too, you just need really big batches, like old school made-in-China style, or the way semiconductors are made.

(3) personally approve capex etc etc – totally common for VC-funded businesses when they’ve burned thru 80% of the $$. Translation A: In the name of time, the other items above are giving blank checks to more people than management can track, and I (Musk) recognize that, and am kindof scared but dealing with it. Translation B: Board is giving me sh*t. Anyways, this doesn’t qualify as “cost cutting” – that would involve layoffs. That would be the 8.0 on the Richter scale.

(4) going to 3 shifts – sensible move, given the goal. However… lots of new staff. The managers, engineers, and experienced techs holding their operations together are going to be working crazy hours and burning out. If they’re smart, they’ll be threatening to quit and asking for raises. (Tesla can’t afford to say no. But they will anyway to the first few, as a symbolic effort to make a stand. so if the staff looking for a raise are smart, they’ll get someone else to “go first” there.) Actually the email sort-of alludes to this – i.e., “what can we do to make you keep wanting to come to work”. Nice of them to offer. Translation: again, prepared to throw $$ at the problem.

(5) Productivity recommendations – standard business fluff. Relevant and good to know they’re trying, but utterly universal, so nothing different than any other big company.

 

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One Comment
  1. Good analysis. Thanks.

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