TSLA: CA Regulators Pursuing 3 Investigations

Tesla Facing New Probe From California Regulator As It Builds Car In A Tent
Profile picture for user Tyler Durden
by Tyler Durden
Thu, 07/05/2018 - 09:28

Investigations into (and concerns bout) workplace safety standards (and OSHA compliance) at Tesla continue to multiply, with Jalopnik reporting that Tesla is now facing a third investigation by California State Safety and Health regulators after a complaint was submitted by an unnamed employee of the company (maybe the same whistleblower who leaked Tesla's skipping on is brake test earlier in the week):

Erika Monterroza, a spokesperson for the state’s industrial relations department, confirmed the agency had opened a new inspection on June 19, the third for Tesla since April.

“As of today, Cal/OSHA has 3 investigations ongoing at Tesla,” Monterroza told Jalopnik last month. Monterroza said department policy prevents her from discussing the content of the complaint that sparked the new investigation. In response to a public records request, a separate department official confirmed the disposition of the complaint can’t be released until the inspection is complete.

Readers may recall that Tesla already had two ongoing OSHA investigations into its business as a result of a detailed and intricate expose performed by Reveal, alleging that the company was underreporting its safety incidents and not doing enough to keep workers safe and the workplace injury free. The latest probe is OHSA's third concurrent investigation into Elon Musk's production standards.

The timing for this investigation is curious: last week Tesla reported that 20% of the Model 3 vehicles made in order to reach its 5,000 Model 3 per week run rate goal were assembled in the giant (and hastily erected) tent outside of the company's Fremont facility.

According to Jalopnik, Tesla is in the process of going back-and-forth with the government regarding permitting at the tent, even though some initial building permits have already been approved:

Building permits filed with the city of Fremont show that Tesla has been temporarily approved to use it for up to six months, but for now several features have been deferred. On Wednesday, records show, Tesla submitted a revised permit that included electrical and piping, and it received permits for a sprinkler system.

Gary West, a Fremont building official, told Jalopnik on Tuesday that his office “understands the timeline that some of our businesses are trying to meet with productions, and the City of Fremont makes a valiant effort to accommodate these concern when we can.”

“As the project designs are submitted to our office for review some of the beginning designs are approve so the first steps of the construction is allowed by our office to commence,” West said. “As additional designs are created and submitted to are office for review the next stage of construction is allowed to continue.”

This report also comes after Reuters published an article at the beginning of the week, detailing some of the consequences Tesla is having to face as a result of rearranging its manpower to meet its Model 3 production goal.

The conditions at Tesla’s production facility leading up to meeting its Model 3 production goal have been reported as nothing short of hellish as Elon Musk "barked" at employees working 12 hour shifts, bottlenecking other parts of the company's production and reportedly causing concern by employees that the long hours and strenuous environment would cause even more workplace injuries and accidents.

Some Tesla analysts and bulls seemed surprised that the company's stock fell on Monday and Tuesday, even after the company was able to report at the end of the weekend that it had not only reached its 5,000 Model 3 per week goal, but also that it had produced 7,000 vehicles overall. “I think we just became a real car company,” Musk wrote in an e-mail to his employees after meeting the goal for one week.

This led to a nearly 50 point swing in the price of Tesla stock during trading on Monday and Tuesday. The stock opened on Monday, to rise above $360 before it ultimately faded, gave up all of its gains and went on to finish the day red by several percent. Tuesday, in a shortened session, the stock fell further, closing at $310.

So Tesla was able to produce 5,000 Model 3's in a week, but at what cost?

Skeptics and bears have asked what is the point of meeting the 5,000 per work goal was if it must be done in an “all hands on deck“ fashion that is going to burn out employees and bottleneck other parts of the production line. For instance, it's now being reported that the company's Model S line is 800 cars behind schedule.


On Tuesday, Reuters reported that this is basically what happened. It added that a "short tempered" Elon Musk personally oversaw production and “snapped“ at employees who were told that that weekend work days were mandatory and that 12 hour shifts should be expected, to wit:

A tense and short-tempered Chief Executive Elon Musk barked at engineers on the Fremont, California assembly line. Tesla Inc pulled workers from other departments to keep pumping out the Model 3 electric sedans, disrupting production of the Model S and X lines. And weekend shifts were mandatory.

...

Leading up to Sunday morning’s production milestone, Musk paced the Model 3 line, snapping at his engineers when the around-the-clock production slowed or stopped due to problems with robots, one worker said. Tesla built a new line in just two weeks in a huge tent outside the main factory, an unprecedented move in an industry that takes years to plan out its assembly lines, and said the tented production area accounted for 20 percent of the Model 3s produced last week.

“They were borrowing people from our line all day to cover their (Model 3) breaks so the line would continue to move,” said a Model S worker on Sunday.

Because of the focus on the Model 3, the S line is about 800 cars behind, the worker said.

“They’ve been throwing Model 3s ahead of the S to get painted to try to assure that they make their goal of 5,000,” the worker said. “The paint department can’t handle the volume.”

Employees were also told to expect working 6 days a week. The company even re-wrote its attendance policy to make exceptions as to when they had to notify employees that they would be working weekends. We can't possibly imagine what impact this has had on "dreadnought" morale:

Last week’s big push also brought a rewrite of the employee attendance policy. After mandatory weekend shifts were assigned, two workers said, Tesla rescinded a policy promising workers at least one week’s notice before weekend work.

“The manager and supervisor are verbally going around and saying: ‘If you don’t come in, you’ll be written up’,” one of the workers told Reuters last week.

Some employees are worried the frenetic pace plus long hours could burn out workers. One employee said they were told to keep working until they met their daily production mark, not when their shifts ended.

“They said starting tomorrow be prepared to work up to 12 hours,” said the Model S employee on Monday. “It’s gonna be basically 12 hours from now on and I’ve got a feeling it’s gonna be six days a week.”

Meanwhile, confirming a prior Reuters report from late last week, Reuters again noted that the influx of new vehicles at a high rate bottlenecked the company's paint shop, despite CEO Elon Musk responding to these allegations last week by Instagramming a relatively meaningless photograph of the company's paint shop as if to say “hey, everything is fine."

Reuters reported that this bottleneck could also threaten the company's annual total production goals:

Disruption of the Model S and X lines could threaten Tesla’s target of building 100,000 of those vehicles in 2018. Tesla built 49,489 of those cars in the first half of this year.

Asked about the potential S and X impact, Tesla said it also produced 1,913 of those vehicles during the last week of the quarter along with its Model 3s.

Tesla said it built a total of 28,578 Model 3s in the second quarter, and 40,989 since production began last July.

The hellish week of production seems to have taken its toll on employees based on Reuters reports. The article notes that employees believe that the strenuous hours and the nonstop work will eventually burn out the staff, if it hasn’t already, and will lead to increased injuries and Musk "going through an awful lot of people". In addition, with just one week's run of 5,000 Model 3's behind them, Tesla is now giving some of the line a break for the Fourth of July holiday:

In the morning of Sunday, July 1, about five hours after the self-imposed second-quarter deadline had passed, the number 5,000 flashed on a countdown screen viewed by Tesla’s Model 3 assembly-line workers. The Model 3 itself bore a “5,000” sign in its front window.

Tesla said on Monday that some of its Model 3 production would be on break as part of the July 4 holiday, with production to resume on Thursday. Tesla plans to build 6,000 Model 3s per week by August.

But the worker told to expect longer shifts warned that pushing assembly-line workers too hard could backfire.

“He (Musk) is gonna go through an awful lot of people because people are gonna start getting hurt left and right,” by the fast-moving assembly line, the worker said.
“There’s only so fast a person can move.”

Tesla had released a production update early Monday claiming that it had met its 5,000 car per week a goal by “factory gating“ 5000 Model 3s and 7000 total cars over the course of a week.

However, as one observer noted on Twitter, the time from reserving your Model 3 to getting it delivered has shrunk. This indicates that the pool of orders waiting to be filled on the Model 3 is also starting to decline.


Considering Tesla has completely scrapped and then revamped its entire plans for its production and has resorted to building cars in a tent outside of its main production facility to begin with, it isn’t surprising to see that another OSHA investigation has been opened. If they are producing vehicles with the same precision that they are running their business, the results of said investigations could turn out to be extremely interesting