Featured Tesla production shortcomings compared with Toyota excellence (sort of)

Having been through the Toyota Georgetown KY plant twice and a Honda plant in Alabama, I can appreciate an orderly plant. Yet somehow, Musk is able to make Falcon 9 rockets with a growing rate of successful launches.

Regardless, I wish them luck!
Bob Wilson

 

• Toyota Georgetown Visitor Center - Toyota Kentucky -|- The Official Website of TMMK
• Honda Plant Visit - I had joined the Alabama Chapter of Society of Automotive Engineers (SAE) and they organized the tour

The Georgetown plant makes Camry and is well worth the trip. Think of it as Engineering Disneyland.

In contrast, I got the impression the Honda tour really wanted everyone to sign a non-disclosure agreement. It had more PowerPoint than plant operations.

Bob Wilson

 

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Best practices for making the corola are very different than the model S or even the model 3. If Tesla would have taken the time to have JIT inventory, they certainly would have saved in rework, but they also would have probably gone under by now. The problems with the model S, had to do with not getting enough parts, not bad parts. They appeared to have had design flaws in initial drive units, which had to be replaced under warranty. If they had waited to get them perfect cash burn with no sales might have killed them. They wouldn't have had the cash to build the super charger network or the gigafactory.

Similarly look at the conservative IQ EV or mirai versus the model 3. The IQ EV took long enough to get to production, that they pretty much shelved it. It was much more conservative to do a small battery BEV based on a small car. That makes manufacturing easy. Of course that doesn't help with design flaws (range was less than the current volt, and cost to manufacture in small quantities likely as high as the volt or leaf). Mirai is being hand built in a JIT factory. That and the TMS didn't save them from recalling all units. Luckily few people want them even with the governments and toyota's subsidies so the cost to toyota was fairly small.

The Model X though was a miss. Complicated design that likely wasn't needed to sell the electric crossover sucked up engineering resources, and caused supplier and manufacturing problems. Tesla could have really used the Lexus team that did the RX, to both design the X for manufacturing and to implement TMS (Toyota Manufacturing System) in production. By then the basis for the model S was done, and suppliers were starting to believe tesla's need for parts.

Model 3, I think the naysayers and investors with large short positions are simply trying to make problems seem worse than they are. I don't see the manufacturing problems that WSJ and others claim. I do see a car that may need slight redesign, and tesla missing the ramp on "production hell". Really if it was toyota we probably would not see the model 3 until maybe march of 2018, but everyone would believe they could make 10,000/week in short order. Tesla does not have the manufacturing talent to do that, and will need another cash raise to buy all the extra equipment. With the model 3 it's build to order and they will have 6 months of orders to schedule for at least the next 9 months. That means you can build inventory if that is the way to get suppliers to produce well. They do need to get the parts and manufacturing process down. I believe they have switched suppliers to intel for entertainment, and I don't think those chips are in the first cars. they may need to change some other parts, hopefully by the end of the year.

I would bet on 220,000 model 3s in 2018 not 500,000. The model 3 appears to be designed much better for manufacturing than the model S or X. I hope they have hired or can hire the manufacturing engineering talent that they need. I'm sure it's an exciting job, but there is not local talent in california, which means they will have manufacturing design centers elsewhere (They bought a German engineering company, and a Michigan tool and die maker) and entice people to move to an expensive state.



+1

A nice historical look from 2016.
The Tesla Way vs. The Toyota Way

The shorts are claiming this slower ramp means doom for tesla. I myself think that at this point a couple of thousand cars by the end of this month would have been a better idea to start with. I hope tesla has hired some strong toyota manufacturing engineering tallent as consultants at least to help with the ramp.

 

you learn a lot in 70 or 80 years that cannot be taught in a classroom. i'm old enough to remember toyota and other japanese manufacturers in the 50's.
and they learned a lot from demming.

 

what exactly are you looking for? the author expressed an opinion, after seeing the production line.
some agree with him, and some don't.
this kind of opinion regarding tesla has been ongoing from the beginning. don't discount wall street trying to effect change on the stock price.

building a new car company from the ground up is one of the most difficult start ups in the world.
everything is not perfect at tesla, but guess what? take a look at toyota recalls over the last ten years, and realize how difficult automobile mass production is.

competition from gm and nissan are welcome, but neither has proven anything yet. you have to admit, this guy does seem like a chill for wall street shorters.

 

The practice is not limited to US stock exchanges.
It is essentially a bet that the stock will go down. If it does, the person shorting the stock makes money. If it doesn't, they lose.

Starting a new car company is a risky venture, so Tesla attracted a lot of shorters. Take a look back through the years of the financial section, and you'll find lots of articles and columns about Tesla failing, losing money, etc. Some even voice disbelief over Tesla doing well.

The losing money one was common, and came about because these stock traders simply looked at the money coming in and going out, without consideration over what the money going out was buying. Tesla was spending a lot on expanding stores, the Supercharger network, and the Gigafactory. Many articles didn't mention this, but made claims of the company losing money on each car sold.

Tesla has missed their own release dates for cars in the past. Those familiar with it may have been expecting the first Model 3 to be delivered in 2018. Now they've done a better job, but production isn't going as fast as they originally predicted. I have already come across multiple reports on it before you posted this one. Most were within financial news sites. It appears to mostly be an issue with a supplier over parts. The Prime was delayed because the supplier for the hatch was having problems. At best, it was minor news outside of the alternate fuel vehicle community. Many likely haven't heard about it; they may not even know what a Prime is, but they likely heard that Tesla is in trouble.

I honestly don't know what to make of this, but it feels like we are only hearing the employees' side.

 

at face value, testa's manufacturing line cannot compete with toyota's. i don't doubt this. it will take a long time, and improvement will probably be slow.
the big issue will be cash flow, as it has been. i can't prognosticate the future, but i don't think we're learning anything new from these articles.
it may likely be the case, as it was with companies like amazon, that investors are in too deep to bail out.

 

Tesla is not building a complex, gas engined car. A Tesla has a much smaller number of diverse parts compared to any engine powered car and this gives Tesla some advantages in manufacturing. As for meeting production dates, I've been on enough complex projects to know schedules are a goal but seldom a 'drop dead' date.

Bob Wilson

 

A short position is also created when selling a put (the obligation to buy a stock at a contracted [strike] price by the contracted date). The objective is to have the option expire worthless. If the stock's price is below the strike price the option will be assigned. If the stock's price is higher the option will expire.

Trollbait, Tesla's accounting is open to interpretation. The one thing that we agree on is that the tradition of the annual capital raise is going to continue. Tesla will continue as long as there is someone willing to give them more cash.

 

Oh its used in London as well. The bulk of the negative stories seem to come from people that have an interest in Tesla not doing well. They have either borrowed shares and sold them or bought an put options (an option to sell shares at a certain price by a certain day. These stories need to be taken with some skepticism and some analysis, as blogs and opinion pieces often are written by people that stand to profit if they can send the stock down.

Now the blog you posted, is not from a short. But he does often give the POV of the shorts. In the past he has said he does not agree with them.

Sure, but why take them at face value. Analyze if the information is true, and if it means what it says it means. For example, in your OP, the big complaint was that production was lower in September than predicted. But stock was much higher than at the beginning of the year. How could this awful manufacturing allow the stock price to be so high? Well the blogger really let you know over a year ago what expectations were, and of course the stock is up because the model 3 manufacturing is going much better than expectations were even in May. Its good to look back.

https://mondaynote.com/chairman-elons-great-leap-forward-68f49ffde372

18 months from the published date of that blog entry will be January 2018. Today Tesla has a full assembly line and designed car with 400,000 reservation holders. They have supplier issues, which are a risk. They had supplier issues on the S and X as well, so predictions of 5000/week in December were highly suspect. The most risky supplier for the S was panasonic. Tesla has reduced risks by sucessfully building the gigafactory with Panasonic as a partner.

Is missing predictions ok in lean? Well if we look at demmings 14 rules, of course it is. In fact these should be treated like predictions, not objectives. Adhering to schedules when it lowers quality is against lean principles.

Then we have the question of

But as we found out 2 days ago, those rumers, that were reported as fact were completely wrong.

Now back to the issue at hand. The blogger has said that last year the factory was not lean. I believe that. He also mentioned in that year old post, that tesla would change the factory completely by july of 2018. Is the factory running lean today? No, its too soon. There are still supplier problems. I do have confidence that whether it is 2000 model 3s a week or 10,000, that after the change over next summer, tesla will have supplier problems worked out, and will be running a lean factory. As Musk himself said, until then, tesla expects production hell, with many hiccups.

I provided an article talking about the tesla versus the toyota way. If tesla was being run like toyota with their deep pockets, things would be smoother in the factory today. There also would be no model S or X, and I highly doubt the model 3 would be as well designed and thought out. There are different ways to produce new products. Tesla and Toyota have different methods, and they work on different types of problems.

I'm not sure what to do with that, its about 2% of the workforce. Time will tell. Toyota has had much bigger layoffs for worse reasons. We can knock down one rumor. The firings are not caused by fear of unions. The profiles of employees that were fired don't fit that profile.

Did they do it for cost cutting as some employees allege? It could be. Labor contribution cost to tesla's vehicles is much higher than other makers. GM and toyota when they were running NUMMI had it as a high cost per vehicle plant compared to other north american operations. We know its not because tesla wants to reduce the number of workers, as they are aggressively hiring. When you grow that fast, getting rid of 2% may be a good thing, if done right. The allegations that people with good reviews were fired without cause is troubling. We should know much more in the next 6 months.

 

In M&A the "synergy" always includes reduced headcount. It's been about a year so Solar City employees should have been nervous. Claiming they were fired instead of being laid off would save severance and unemployment payments.

The guy in the store selling the car can also sell solar panels, batteries and roofing tiles.

Two accounting systems aren't needed. Two sets of accounting departments aren't needed. Two Legal Depts. aren't needed and at the top two relatives aren't needed. (The Rives are long gone.)

 

The solar city layoffs mainly happened last year and were much larger (reduced head count of 3000 through layoff, firing, and attrition). We need to wait and see how many people were fired and if its good or bad for the company. Tesla has quickly ramped up to 33,000 employees, but the number of firings are large for a growing company. It could be cost cutting, or problems in HR in hiring the wrong people, or something nefarious. I doubt its nefarious, but it may be hard hiring great employees during "production hell" and low moral, if the firings have caused moral to drop. The tech world and automotive world are rough and tumble. I'm sure there are hard feelings, but this appears to be small compared to many problems out there. We should know in the next 6 months what is really going on at Tesla in terms of hiring/firing.

 

Toyota AND Honda were often POS's - even into the 1970's. I DO remember my 600cc honda coup z - not fondly either;



That said - it DID actually last 15,000 miles longer than my 1970's Chevy Vega, which ALSO blew up. Only thing was, the vega was not worth rebuilding. Ok, even GM has their share of poo.

The article has a ring of a bunch of truth - however it misses ONE very important thing.
If you feel you need/want/like a 300 mile all electric - lots of power - with massively increasing quick charge capable infrastructure / often with 6 to 15 charge stalls ... where ya gona go .....
That's the thing ... it's the only game in town. Other companies keep talking the talk - but even Tesla's nearest competitor is a WAY-distant 2nd place. That's likely a good part of the reason that their stock has remained unsinkable so far.
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Yet even Toyota can fall short of excellence. Read the Motor Trend review of the latest sedans from Honda and Toyota. Their take was Toyota built a better Camry than the previous model but the Honda Accord was described as superior in almost every subjective and objective criteria. So production excellence is one factor, design another and reliability and reputation (see CR's latest). There was a hybrid portion in the MT article too.