Does Tesla’s ‘big ask’ for cash from suppliers risk disrupting the supply chain?

Dive Brief:

  • Tesla sent a memo to some of its suppliers, asking to return cash to the automaker, The Wall Street Journal reported. Tesla did not respond to Supply Chain Dive’s request to confirm the memo.
  • The automaker told the Journal it is looking for price reductions from some of its suppliers to improve competitive advantage.
  • Since the beginning of the year, “we’ve seen a huge run up” in the amount of money due to suppliers, Bill Danner, president of CreditRiskMonitor, a financial risk analysis and news service, told Supply Chain Dive. The figure, however, isn’t unexpected as Tesla ramps up production of the Model 3.

Dive Insight:

At the end of the first quarter of 2018, Elon Musk assured Tesla shareholders he’s feeling “quite confident” the auto company will have positive cash flow in the third and fourth quarters of the year. If Musk is able to deliver, the result will be a sharp turnaround from the past several quarters of millions in negative cash flow.

Credit: Shefali Kapadia / Supply Chain Dive, data from CreditRiskMonitor

On its path to turn the numbers around, Tesla has boosted production, restructured its workforce and now it is going to its suppliers to negotiate prices and payment terms. “If they can get better payment terms, that won’t make it more profitable, but it will at least cause them to have better cash flow, because they don’t have to pay the suppliers quite as quickly,” Danner said.

But Danner doesn’t think most suppliers have the financial capacity to move the needle far enough to bring Tesla’s cash flow into the black.

“The suppliers are probably feeling a little stressed out at the moment,” he said. As the automaker boosted production of its vehicles, it likely requested more parts produced quickly by its suppliers, along with engineering and design changes. “And now he wants money back? Those are big, big asks.”

As Tesla demands more of its suppliers, it needs to consider the long-term impact, Marcell Vollmer, chief digital officer at SAP Ariba, told Supply Chain Dive in an email. “It’s easy to ruin trust but takes ages to rebuild.”

While Tesla has reportedly asked for cash back, Volkswagen went to its supplier Prevent years ago with the same goal to boost profits. It asked Prevent to lower prices, but the move backfired. “Prevent was a single supplier and stopped delivering seat covers. Volkswagen had to stop production. The supply chain got disrupted and … Volkswagen had to delay delivering thousands of cars to consumers,” Vollmer said.

Delayed car deliveries would mean delays in funds coming in — and could translate to late supplier payments.

Since the beginning of the year, Danner said Tesla’s delinquency rate of supplier payments has stayed about the same. “They’re not paying everybody on time, but they’re paying a lot of their vendors on time,” he said.

If the delinquency rate increases, it could sound alarm bells for vendors. Tesla is “some distance from bankruptcy,” Danner said, but given its high debt and financial structure “if the economy stumbles, this company is pretty vulnerable to economic shock.”

Yoga enters the workforce

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Employers Embracing Health, Productivity Benefits

Yoga article

Of the Pentagon’s many secrets, one of the most surprising may be that yoga classes are offered at this military fortress on a regular basis. Jess Pierno, formerly a Department of Defense (DoD) employee, was one of the instructors during her time at the Pentagon, teaching a weekly lunchtime meditation and yoga class.

“These people who are dealing with huge stressful issues take an hour for themselves, hit the reset button on their brains, and then go back out and deal with everything. They loved it,” said Pierno, who last year left DoD and opened Yoga Heights in the Petworth area of D.C.

Many businesses in the D.C. area are taking advantage of yoga’s restorative powers, as they take a vested interest in how wellness classes can improve employee health, morale, productivity and relations.

Supporting Good Health

The physical benefits of yoga are numerous. Among them, the American Osteopathic Association says, are improvements to circulatory health, metabolism, sleep and endurance.

Yoga can also help to reverse some of the side effects of the modern workplace. “Staring at a computer all day, I think we naturally tend to hunch over, rounding [our] spine, instead of sitting up straight,” said Nanci Dodson, D.C./Maryland area manager of CorePower Yoga,  a company with yoga studios nationwide. She said yoga practitioners become more aware of their posture, making a conscious effort to sit up straight throughout the workday.

Seeing the potential benefits of yoga for office workers, many companies are hiring yoga studios to lead classes at the office, free of charge for employees. Angela Proudfoot, human resources director at the Municipal Securities Rulemaking Board in Alexandria, Va., established a corporate yoga program there.  The hour and 15 minute classes meet weekly at her office after working hours.

Proudfoot herself first tried yoga four years ago, after determining that physical therapy was not improving a serious foot injury sustained while skydiving. Her injury will never heal entirely, but she said practicing yoga has drastically improved her balance, flexibility and mobility. She is even able to skydive and run long distances again.

Aqeel Yaseen also found the benefits of yoga to be life-changing. When he first tried it, he was suffering from depression and weighed more than 300 pounds. Over the course of five years, yoga  “helped me change my habits, and I lost close to 200 pounds,” he said.

Bringing Yoga to Employees

Following this transformative experience, Yaseen got his yoga teacher certification and now teaches 18 classes each week. He teaches studio classes at Yoga District, and corporate classes at several area law firms and the U.S. Bureau of Labor Statistics.

“More and more companies are showing a dedication to their employees’ health and wellness, which is incredible,” said Catherine Zack, wellness director and senior manager at Flow Yoga Center in D.C.’s Logan Circle neighborhood.

Corporate yoga programs are also in place at the International Monetary Fund, the Kennedy Center, the Department of Justice and many more offices, Pierno said.

The Department of Youth Rehabilitation Services recently started a corporate yoga program through Yoga Heights. “The director came the first day and took class with everybody,” Pierno said. “He really led by example. He took off his shoes, rolled out his mat and participated with everybody.”

Building Bonds & Focus

The example of that director is reflective of how yoga can lower barriers between executives and staff. “Sometimes a manager and someone reporting to them are practicing right next to each other, and it changes the dynamic of their relationship,” Yaseen said.

Proudfoot agreed that the classes at her office feel like a “team-building exercise.” She added, “The people who come to that class on a regular basis really get to know each other on a completely different level.”

She also said that her colleagues reported better concentration and productivity at work. Studies conducted at the universities of Illinois, California and Pennsylvania all found cognitive functioning improved after just one yoga class, helping to boost focus and memory.

“A lot of times, we spend our time dwelling on something,” Zack said. “What yoga and meditation really helps us do is to stay focused inside the moment.”

Proudfoot can relate. “I would go into stressful situations, and I would just breathe and remember some of the mantras that my teachers would recite at the end of classes,” she said. “That for me was a complete 180.”

A meditative state doesn’t come easily to everyone, though. Yaseen said every corporate class he has taught contains its fair share of skeptics.  Yoga classes typically end with a 10-minute “savasana” (corpse pose) in which students lie on their backs with eyes closed in a state of deep relaxation.

“It’s very difficult for them to let go for 10 minutes,” Yaseen said, “because they think maybe they’re wasting their time.”

Getting Yoga on the Schedule

Time is of essence in the corporate world, and many executives complain they don’t have enough to spare for daily yoga practice. However, given the benefits, it could be worthwhile to fit yoga in, even if it’s in small increments.

Zack said lunchtime classes bring out the executives at Flow Yoga Center. She added that the studio is working actively to expand its corporate programs even further.

As an alternative to office classes, some companies offer corporate yoga memberships. These partnerships provide employees with discounted rates on classes at a yoga studio. At CorePower, a number of executives use their corporate memberships to attend classes before and after work, Dodson said.

When going to a studio class isn’t feasible, home practice is always an option. Yoga videos for every level of practice are easy to find online. “Just start by taking five minutes every morning,” Pierno advised. “You’ll notice the changes, and you’ll notice an increase in energy. And before you know it, you’ll want to practice longer.”

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