By CCN: The embarrassment for Tesla continued this week after a burned supplier sued Elon Musk’s firm over an unpaid metal bill.
French firm Lebronze Alloys alleges $1.77 is still owed by Tesla after the car company abruptly pulled the plug on existing contracts. Lebronze had supplied parts for Musk’s electric vehicles since 2016 – the last time the Tesla stock price sunk as low as it is today.
Back to Beginning for Tesla Stock
When Tesla entered into an agreement with Lebronze Alloys in 2016, its stock had traded between $150 and $180 for most of the year. The next two years saw Tesla record a succession of new all-time highs – but those peaks proved short-lived.
In the past twenty-four hours the stock price gained a sharp 2.8% as it rebounded from six months of straight decline. TSLA’s downward trajectory looks decided in the short term, but the situation could be worsened depending on how it responds to this latest controversy.
Cough Up, Elon! French Alloy Firm Demands Jury Trial
According to a lawsuit filed Tuesday in the California Northern District Court, Lebronze Alloys SAS is throwing the kitchen sink at Tesla over the unpaid bill. The document describes the plaintiff’s complaints as:
“Breach of Contract, Breach of the Covernant (sic) of Good Faith and Fair Dealing, Fraud and Deceit; Demand for Jury Trial against Tesla Motors, Inc.”
Lebronze, in their as yet uncontested version of the story, say they attempted to extract the unpaid 1,559,420 euros (roughly $1,768,460) without success. The lawsuit states:
“LBA made numerous efforts to get Tesla to pay the amounts Tesla owed to LBA. LBA convened meetings, sent e-mails and letters, and initiated numerous telephone calls in an effort to get Tesla to pay what it owed, to answer any questions Tesla may have had, and to resolve any issues.”
The French firm says an abrupt end to their agreed contracts – communicated via an unexpected and curt telephone call – is at the root of the current mess.
“On April 17, 2019, Tesla, without notice, requested an immediate telephone conference call, during which Tesla purported to give verbal notice of termination of the Agreement and the Amended Agreement, without advance notice and contrary to the terms…”
Not The First Controversy on Supply Side
Tesla has so far declined to comment on the allegations, but a look at the recent past reveals a history of controversy with working partners. In mid-2018, Tesla’s suppliers received a memo detailing the company’s request for “refunds”, or cashback on business deals conducted up until that point.
As reported by Business Insider at the time, the memo stated the refunds were “essential to Tesla’s continued operation”. TSLA was valued above $300 at the time, and has sunk ever since, despite the assurance by a company spokesman that the request was simply part of the negotiation process:
“Negotiation is a standard part of the procurement process, and now that we’re in a stronger position with Model 3 production ramping, it is a good time to improve our competitive advantage in this area.”
Elon Musk clearly recognises the trouble facing his firm, as he now attempts to hasten delivery dates by micromanaging. But in his attempt to turn Tesla into a profitable venture, he appears to be placing more pressure on suppliers, who now seem obliged to help him succeed. They don’t. They just want to get paid.