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Tesla and the auto industry respond to the COVID-19 pandemic
Posted on March 25, 2020 by Charles Morris
This was not the kind of disruption we wanted to see. Just about every major auto plant in the world has announced plans to suspend production (Electrek is maintaining an updated list of closings).
Elon Musk considered keeping the vehicle production lines at the Fremont factory open, despite the Bay Area’s “shelter in place” order. After several days of back-and-forth with the Alameda County Sherrif’s Office, Tesla finally decided it was best to temporarily suspend production.
According to a statement issued to the press, only basic operations will continue, “in order to support our vehicle and energy service operations and charging infrastructure.” The factory in New York will temporarily shut down as well. “Operations of our others facilities will continue, including Nevada and our service and Supercharging network.” (Panasonic has announced that it will ramp down operations, and remove its 3,500 employees from the Nevada Gigafactory for 14 days.)
Tesla has clarified that employees who are sick, or simply don’t feel comfortable going to work, can take a certain amount of paid time off, and unpaid time off after that is exhausted, without penalty.
Of course, the safety of Tesla’s employees has to be the company’s first consideration. However, the next big question is the effect a shutdown will have on the company’s financial position (and those employees’ future employment once the crisis is over).
It would seem that the timing could hardly be worse. The company is just beginning deliveries of Model Y, and was surely hoping for a big media splash and a smooth ramp-up to volume production. The debacle also coincides with the end of Tesla’s fiscal quarter (the quarter ends March 31, and the shelter in place order is to expire April 7). This is typically a time when the company rushes to deliver a lot of cars, in order to hit the quarterly numbers that keep the stock pundits writing good things.
However, there was one fortuitous bit of good luck—the recent blastoff of TSLA stock allowed the company to raise a large chunk of new capital, shoring up its cash reserves. “Our cash position at the end of Q4 2019 was $6.3B before our recent $2.3B capital raise,” said Tesla in its recent statement. “We believe this level of liquidity is sufficient to successfully navigate an extended period of uncertainty.” A couple of stock pundits have also weighed in, saying that they think Tesla’s cash reserves will carry it through at least a short factory shutdown.
Meanwhile, in what GM CEO Mary Barra called “a WWII-style mobilization,” several automakers, including GM, Ford, Fiat Chrysler, and Tesla, have offered to help with ventilators and/or masks.
GM announced yesterday it was working with Ventec to speed up efforts to manufacture 200,000 ventilators as part of "Project V" at a GM plant in Kokomo, Indiana.
Ford said it stands ready to "help the administration in any way we can, including the possibility of producing ventilators and other equipment."
And, Reuters reports that Fiat Chrysler CEO Mike Manley told employees in an email that the Italian-American automaker would start converting one of its China plants to make face masks in the coming weeks and ultimately make over 1 million masks a month.
In addition, Tesla is working swiftly to get medical supplies to hospitals in order to assist with the COVID-19 crisis. The Silicon Valley automaker has already delivered over 100,000 N95 masks to University of Washington Medical Center, UCLA Health, and Columbia University Irving Medical Center. Tesla has also delivered over 1,000 ventilators for use in hospitals throughout the state of California. And Tesla's CEO Elon Musk is determined to do more.
Written by: Charles Morris