Tesla Inc (NASDAQ:TSLA) is in trouble. At very few points over the last five years has that not been true. The firm is a fast grower in a new industry. It doesn’t generate its own cash, and it’s fighting off some of the biggest most organized forces in the American economy. Though it appears to be winning a fight against Big Oil and Big Dealer, an even more powerful lobby is on the way.
Workers at the Tesla factory in Fremont, California want to organize in order to improve their conditions. CEO Elon Musk, whose attitudes were shaped in a decidedly anti-union Silicon Valley, doesn’t agree.
Tesla is fighting its own workers
Tesla Inc does not want to see its workers engage in collective bargaining through a union. The firm is afraid that it will be slowed down by the demands of the human beings that actually make its cars and see its production schedule and overall efficiency lag as a result.
That’s the idea behind the firm’s resistance to unionization. Despite that, and understandably, many workers don’t agree with that idea. Workers calling for unionization spoke to The Daily Beast recently and explained their position.
They’re worried, according to the piece, that the surge in production will be careless leading to workplace injury. They’re also concerned that forced overtime will be a big part of how Tesla Inc (NASDAQ:TSLA) works to keep to its schedule.
Back in May Elon Musk explained his position in a way few enough workers will be able to empathize with.
“This is not some situation where, for example, we are just greedy capitalists who decided to skimp on safety in order to have more profits and dividends and that kind of thing. It’s just a question of how much money we lose. And how do we survive? How do we not die and have everyone lose their jobs?” he said.
A similar theme came up in an email he sent to employees recently, as reported by Electrek.co. In the dispatch he claimed that the union’s “true allegiance is to the giant car companies, where the money they take from employees in dues is vastly more than they could ever make from Tesla.”
Big oil is receding
This isn’t the first major threat that Tesla Inc (NASDAQ:TSLA) has faced, of course. The firm may even be able to learn a lesson or two from the fight it’s currently winning.
Tesla’s strategy against big oil has rested on two pillars: public relations and technological growth. A successful marketing campaign, which made Tesla look like the ethically superior choice, gave the firm room to evolve and grow. It is still, in fact, actively engaged in creating that image today.
The second part of the strategy is technological superiority. Public relations can’t keep handing you victories forever. Instead, the firm has poured everything into making its cars better. At the end of July it launched its most competitive vehicle yet, the Model 3.
At $35,000, it’s not going to be a car for everyone, but it shows the direction that EVs are going. If Elon Musk continues to be able to cut the price, Big Oil will soon be irrelevant, particularly for personal transportation. The very same could happen to the firm’s latest target, organized labor.
Tackling Big Labor
Public relations campaigns against organized labor have been a mainstay of American culture since the movement began in the nineteenth century. They extend from the famed trial of Sacco and Vanzetti, to the more recent demonization of teachers by Wisconson governor Scott Walker.
Tesla’s tactics on this front are aimed squarely at its own workers, rather than the public at large. The firm is blaming unions, according to the Daily Beast, for the closure of NUMMI, the Toyota factory previously situated at the Fremont site.
That’s a battle it may or may not win, but the ideological campaign, claiming that Unions kill jobs, may work well as a delaying tactic. If you listen to Elon Musk speak about production, all he cares about is efficiency and gross margins. Getting rid of workers through automation appears to be the end goal for almost every US car maker.
This isn’t an all or nothing fight either. Each worker removed from the floor makes unionization less powerful. Each role down-skilled through the addition of more capable machines makes that worker more easily replaceable.
Tesla risks are still looming
The union threat should be seen as a major one by Tesla stock holders. Though there’s nothing necessarily wrong with organized labor, it can be very bad for a production schedule. Right now the future of the firm appears to rest on sticking tightly to its calendar.
Any organized action by those who work on the firm’s factory floor could get in the way of that. If Tesla has to give them better conditions, such as doing away with mandatory overtime, it could result in the firm missing production targets.
On the other hand, actual unionization with a view toward widespread disobedience could cause chaos for Tesla Inc (NASDAQ:TSLA). When discussing production hell, Elon Musk likes to point the finger at the third parties that make components for the Tesla Model 3.
When promising a July start date last year he said, speaking of a plausible delay, “The reason is that even if 99 percent of the internally produced items and supplier items are available on July 1, we still cannot produce the car because you cannot produce a car that is missing one percent of its components.”
It’s even harder to produce a car that’s missing 10 percent of its factory floor operatives because of a union strike.
What’s happening to Tesla stock?
Tesla Inc is a very small firm with incredible ambitions. Based on its sales, it’s not really worth talking about on the national scale. The way Wall Street treats it, however, is as a company set to change the world. As of market close on Friday, August 11th, the firm was the most valuable car maker in the US by market cap.
That has varied quite a lot during 2017 as the firm has built up to the launch of the Tesla Model 3. There are still a lot of major risks out there. Just this past week Mr. Musk managed to raise enough cash to get him through the end of the year, but that cash pile could drain quickly in the face of an unexpected crisis.
A union driven strike, which Elon Musk might, in keeping with his previous statements, blame on a conspiracy driven by Detroit’s auto giants, could set off such a crisis.
Quality public relations and technological growth are a powerful combination. We’ll have to wait and see if Tesla can credibly use them to remove the twin thorns of Big Oil and Big Labor from its side permanently.