Tesla in the Crosshairs Again Over Factory Conditions

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A recent story in The Guardian once more focuses attention on working conditions for the employees who build cars for Tesla Inc. (NASDAQ: TSLA). The report details the toll of the company’s drive to raise production and turn a profit.

Tesla has plans to ramp production to 500,000 vehicles by the end of 2018, up nearly 500% from current production rates. That means more employees, more capital spending and, almost certainly, more effort from current employees.

The Guardian cites a production worker:

From what I’ve gathered, [Tesla CEO] Elon Musk started Tesla kind of like an app startup, and didn’t realize that it isn’t just nerds at a computer desk typing. You really start losing the startup feel when you have thousands of people doing physical labor.

Working conditions on the factory floor at Tesla came under fire earlier this year when a production worker posted a story at Medium pointing out that the average assembly line worker’s wage at Tesla was $17 an hour, compared to an average of more than $25 an hour at other U.S.-based auto plants.

Musk replied that once stock options are included in the pay calculation, Tesla’s employees are “the highest paid in the industry.” Employee reactions to the option and restricted stock unit grants has been mixed.

The Guardian report included comments from Musk:

I knew people were having a hard time, working long hours, and on hard jobs. I wanted to work harder than they did, to put even more hours in. Because that’s what I think a manager should do.

Tesla didn’t dispute that its recordable rate of injuries and illnesses was above the industry average between 2013 and 2016, but changes in its practices have resulted in a rate for the first months of 2017 that is 32% below the industry average.

To meet its production goal of 500,000 vehicles by 2018, Tesla will have to rely on more automation. In August of last year, Musk talked about his vision of the future for the company’s auto plant:

The internal name for designing the machine [that] makes the machine is the – we call it the alien dreadnought. At the point at which the factory looks like an alien dreadnought, then you know you’ve won. It’s like, what the hell is that? So we’ve got alien dreadnought version 0.5 will be Model 3. It will take us another year get to version 1 and probably a major version every two years thereafter. By version 3, it won’t look like anything else. It might look like a giant chip pick-and-place machine or a super high-speed bottling or canning plant, and you really can’t have people in the production line itself. Otherwise you’ll automatically drop to people speed. There’s still a lot of people at the factory, but what they’re doing is maintaining the machines, upgrading them, dealing with anomalies. But in the production process itself there essentially would be no people.

That’s pretty tone-deaf. Given the complaints from workers about conditions and the injuries that they’ve incurred, it sounds like people are no more than interchangeable parts that eventually will be replaced by a machine that doesn’t complain about working conditions or pay.

Tesla’s stock closed at $313.06 on Thursday and traded up about 1% in Friday’s premarket session at $316.10. The stock’s 12-month price target is $275.20. The company’s market cap at last night’s close was $51.42 billion more than $2 billion more than GM and nearly $10 billion more than Ford.