Tesla's Klaus Grohmann Ousted After Clash with CEO Musk
reuters.com
reuters.com
I mean, how was this not brought up and made a settled point before Tesla acquired his company? Big fan of Musk but this is on his shoulders. According to reports, Telsa is already talking to other Grohmann customers, read their competitors, on how to compensate them for breaking the contracts.
Now they are facing the same engineers they just acquired wanting to go on strike.
I'd start to worry about how Tesla is going to fund Model 3 manufacturing, buying out competitors from contracts that they don't want to fill, and how to deal with a set of key employees who may want to unionize and certainly want higher pay, but Tesla just somehow always seems to find a way.
The stock is close to its all time highs, and short interest is at the bottom of its trailing year, so I guess I'm not the only one who has just thrown up their hands and just let Elon have his way.
At what point does shorting Telsa join "starting a land war in Asia" as a rule to live by:)
From Zero Hedge....
> The German labor union IG Metall has demanded that Tesla's management formalize multi-year job guarantees and increase salaries as a way to provide assurance amid management turmoil. The alternative is a strike which could lead to further "unexpected" delays for the Model 3, and even more hyperbolic statements from Musk on his twitter account to deflect attention from increasingly growing problems in Tesla's paradise.
BTW noncompetes are illegal in California where Tesla is based.
http://www.lexology.com/library/detail.aspx?g=2bae173f-7fe4-...
They signed exclusive contracts with suppliers.
They designed parts which took many iterations of surface finishes and annealing schedules and tolerances to get right. Each iteration requires months of turnaround time and $€£ in manufacturing costs.
Sure the team can go elsewhere. But it will take them almost as long to set it up the second time around, and almost as much money.
Things are a bit different in Germany than in the USA when it comes to this.
>> Things are a bit different in Germany than in the USA when it comes to this.
> Would you care to elaborate?
Here's an attempt at an explanation:
Both turnover and friction occur during acquisition in Germany as well, obviously. And indeed friction is probably independent of nations (and their differing laws and cultures), so I'll focus on turnover.
So, turnover. The legal notice period in Germany is (ignoring exceptions) at least one month, and up to seven months by law. Often employer and employee contractually agree on even longer minimums, three months are quite usual. There's also an unspoken expectation that permanent employees are in for the long haul. By contrast, IIRC many US States allow essentially zero notice period, and the famous two weeks' notice is essentially just courtesy.
Culturally, there's also stronger (albeit eroding) attachment between employers and employees. Especially in Mittelstand companies, such as Grohmann seems to be, the owner takes the stance of a benevolent patriarch, taking his responsibility for his employees seriously, and workers tend to reciprocate, and be very protective of their boss. In fact, such a company structure and climate may well be a factor for when considering an employment offer.
Since identification with a company can thus be very strong, there would be considerable reluctance to leave, especially at such a critical time. You don't just leave your colleagues and your customers hanging. In fact, perhaps it was this sentiment which caused Klaus Grohmann to throw in the towel, when he realised he was expected to work against the best interest of his clients (and, by extension, employees).
I assume that such a departure of a patriarch will be a strong signal to the rest of the company.
I mean, Tesla was started as AC Propolsion and the CEO was fired, although fairly different circumstances. Either way, when you sell you sell control.
AC prop still exists. You were correct
Probably something like, "The plan is X but of course the details aren't set in stone, we're a fast-moving company so we'll revisit our roadmap every so often." And then down the road Elon wants to do something that Grohmann strongly disagrees with, and the only plausible resolution is to fire Grohmann.
This doesn't seem too surprising to me. Tesla bought this company to make Teslas. Why should Tesla spend any effort at all helping BMW and Daimler make cars? Maybe there's some rationale there but it doesn't surprise me that it is low priority.
This luminary was passionate about automation, and wanted to continue fulfilling the purposes of his company which specializes in automation. His intentions with regards to that were almost certainly abundantly clear at the time of purchase. Tesla just figures, they're the owners now so it's their way or the high way.
"I definitely did not depart because I had lost interest in working," had may as well be printed on every business lawyers' card, because it's probably the most common thing they hear in exit interviews. Your over-protective clawing is costing you your workers, idiots!
Tesla should not be surprised if Grohmann will see a tit for tat and run into difficulties cooperating with other German suppliers, which they most certainly rely on.
The companies Grohmann supplied have their existing contracts; if those contracts are not honored, THAT will be despicable, and those companies will then have legal recompense. If the contracts are negotiated away, there's no problem. If contracts are honored but those companies don't like future contracts (or lack thereof), that's on the other automakers for not forming a consortium and buying Grohmann when they had the chance.
I view the labor issue as separate; labor's issues are only tangentially about whether Tesla is supplying parts to other automakers. Their concerns are primarily about the implications on salary, benefits, and particularly job stability. Labor is always free to do anything that's legal under labor law to improve or negotiate a better position, regardless of who owns Grohmann or to what companies it supplies parts.
For example, if Oracle or Microsoft did it, literally no-one would be surprised.
Perhaps Tesla's use of hmmm... "IT industry tactics" in non-IT industries is the problem?
Apple is doing stuff that's not too different: using their large cash to lend money (with lower interest than a bank) to Chinese manufacturer, so they can build the factory and hire the labor to manufacture the Apple products. And Apple cashes in with interests, with cheaper products and exclusivity deals for some time. It's a win-win-win for them.
I think the lesson here, for something as crucial as automation, you're taking a risk when purchasing robots from vendors.
[1] https://www.therobotreport.com/news/filling-the-void-left-by...
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Tesla Grohmann – Mail from Elon I am very grateful that last Thursday I had the opportunity to talk to you and I wanted to give you some additional thoughts.
Tesla is unlike most other companies. Unlike other companies, the existence of Tesla is not only to make money. If it were only about this one goal, then I can tell you that the founding of a completely new car manufacturer would definitely not have been the smartest way. Our foundation and the foundation of everything we do is to accelerate the advent of sustainable energy. The welfare of our planet is in great danger, and in order to solve this problem, we need a sustainable solar energy production, we need a sustainable way to store the energy in stationary batteries and we need a sustainable way to consume this energy with electric vehicles. It is critical of the future of humanity to solve this problem – we all want a better world for future generations.
Tesla has made a number of important steps towards achieving this mission in the last 14 years of our existence, but none is more important and can make a bigger difference than Model 3. For the first time ever, there will be an electric vehicle that people can afford and which people love. When Tesla was founded, no one thought that an electric vehicle could ever be more than a golf cart. Today, Model S is the best-selling vehicle in its class. Model X is fast to pick up and recently won a golden steering wheel. And Model 3 is on the brink of production start – just one year after the most successful product launch ever. After the Model 3, many other vehicle products will come, for which Tesla Grohmann will play a key role. To name just a few, which have already been publicly announced (there will be many more): We are developing Model Y (an affordable mid-range SUV), a heavy-duty semitrailer, a pickup and the next generation of the roadster sports car.
And these are only the cars. Tesla is about to launch a new solar roof into the market that will completely change the importance of the use of solar energy. Tesla will soon produce more batteries than the entire world has produced in 2013. These batteries will enable everything to be operated with sustainable energy, including the cars we manufacture. I was never more optimistic about the future of Tesla. Although it is not what drives us, Tesla has the real potential to be one of the most valuable companies in the world.
We bought Tesla Grohmann because we believe that Tesla Grohmann will play an important role in creating this future. It is not enough to produce cool products. To be successful, we need factories that are as good as the products themselves.
This brings us to the current topics at Tesla Grohmann:
First, the question of trust and the longing of every employee for job security. I understand that you are concerned about our decision to focus on Tesla projects instead of serving external customers. We have made this decision, because just so much work has to be done on critical Tesla projects. We really have so much to do that we will be able to hire even more extraordinary talents, and we plan not only an expansion of the team, but also our production facility in Prüm. For all these reasons, I would like to assure everyone at Tesla Grohmann that we will not be able to reduce our workforce in the foreseeable future, Even after these five years, we are expecting further growth at Tesla Grohmann and do not expect any personnel reductions. However, we wanted to give you absolute security for a definite period of time. This is a promise you can rely on and I will ensure that it is also formally implemented.
Second, on remuneration. Last week, we announced that each employee at Tesla Grohmann Tesla will receive shares worth 10,000 euros (US $ 10,000), distributed quarterly over the next four years, and an immediate bonus of more than 1,000 euros in cash. This is just the beginning for each Teammitgled. We will also enter into discussions immediately with the works council to ensure that the remuneration of each individual employee is competitive and corresponds to the local cost of living. Of course, no one at Tesla Grohmann should earn less than he can expect on the local labor market; Just as no one would reasonably require the remuneration in Prüm to be as high as in cities like Stuttgart or Munich, where the cost of living is much higher. In any case, every Tesla Grohmann employee will have the chance to earn considerably more salaries and shares than is usual in the industry and relative to the cost of living in Prüm. Unlike other automotive manufacturers, each Tesla employee receives Tesla shares in addition to salary. These shares can be easily sold for money, but they also open up the possibility of earning much more through stock appreciation. The tenfold increase in our share price over the past five years has made our shareholding exceptionally profitable for our Tesla employees. I firmly believe that we have the potential for a further ten-fold increase over the next five to ten years. That would make a total value of € 100,000 from the share of the share of € 10,000. Although we would not recommend it to anyone, because it is very likely less worthwhile, all those who would rather have a simple cash bonus, instead of the shares, would demand 2,500 euros in cash every year. Tesla firmly believes that extraordinary performance must be rewarded with additional cash and share bonuses. So this is only the beginning.
Thirdly, it is clear that you would like to see more changes at the workplace. At Tesla, we are proud to offer a pleasant, fair, and exciting work environment. It is very important for me that you like to work every morning. We have drawn up a long list of change measures to bring Tesla Grohmann to the conditions at other Tesla locations, as well as changes that are specific to Tesla Grohmann and which we are now trying to implement. This list will be visible in all buildings visible to all. We will update the list on a regular basis so that everyone can see what changes have already been made, which are currently being implemented and which will be implemented soon. You should see every week that improvements happen.
Finally, I know that IG Metall wants to bring the workforce of Tesla Grohmann on the union line. I would like to share my thoughts with you. It is my firm belief that the separation of the workplace into “executives” and “employees” does not create a good working environment. We want to create a system of equality without artificial barriers so that someone can start as a trainee and one day lead the entire company. This is why we eliminate all the special privileges of the executives. For example, everyone will have equal access to parking, eating the same tables, and there will be no management offices. I am convinced that managers should work at the forefront, in the same work environment as the entire team. Even though I run the company myself, I still do not have my own office and often moved my workplace to the most challenging area in the factory and slept on the factory floor when there was a real crisis. Managers should always take care of their team before they take care of themselves – the supervisor is there to serve his team – not the other way round.
As I said at the beginning, everything at Tesla serves our mission and I do not believe that IG Metall is sharing our mission. They have publicly announced in the press that electric cars do not take care of them. In addition, they have a real conflict of interest because their top priority will always be the members of the hugely established automotive manufacturers: their potential of membership is much greater than at Tesla Grohmann.
I would like to thank you for all the contributions you have made to Grohmann over the years. I look forward to what we can create as a tightly integrated team together.
Elon
I find the idea pretty laughable.
The second and third paragraph of the article explain who Grohmann is in relation to Tesla:
counting on Grohmann Engineering's automation and engineering expertise
described Klaus Grohmann and the company he founded as a "world leader in highly automated manufacturing".
Later:
the workforce felt insecure about becoming so dependent on one client after the founder's departure.
The rift is explained throughout as being basically, should Grohmann Engineering focus on Tesla above it's prior automative relationships with Tesla competitors? Musk says yes, Grohmann says no.
And the last two paragraphs show what immediate effects Tesla is going to have to deal with (compensating existing Grohmann customers, and pressure from the German labor union)
I wish there was no segment of HN that cared about this.
I think this is probably why people are constantly shorting Tesla. Why would you expect a company run by a person who hardly seems to care about share price to maintain its share price over the long run?
That's precisely my point. The stock price is a moving average of people's guesses and hopes about Tesla's performance. Very few of these people actually have a window into what's in Elon's mind. To that extent, the stock price is more a metric of the 'ignorance of the commons', rather than their wisdom.
Elon absolutely should not be focusing on micro-optimizing Tesla stock.
I think the essence of this situation is, the stock market wants companies to pander to its every whim, BUT the stock market also has a dim awareness that this is trading off long-term success for short-term cash-in tactics. They know what they want but they also know it is bad for them, they just can't help themselves.
You could counter this by being fierce and stern and saying 'no, you must eat your spinach before dessert!' and probably have some success, if your business was based on hard-nosed determination. Amazon can do that, because they are tougher than Wall Street and will do what's best for Amazon, garnering respect.
Tesla's different. Musk's positioning is the foggy-eyed mystic, the guy with a vision WAY beyond what anybody else dares to have. Whether or not this is true this is how he has to behave. So, if Musk says things like 'ectually capital isn't even real, so the share price doesn't matter, it just slightly affects how fast we can roll out batteries and synergize with going to Mars', if it was a normal company the stock market would go WHACK and it would be goodbye Tesla.
Instead, since Musk is Musk and since the whole concept of Tesla/SpaceX is based on that impossibly grand vision, the stock market sort of gets wide eyes and goes quiet, and are careful not to cross Musk.
It's a type of dominance behavior. He doesn't have to yell at them: he acts like they're BENEATH him, and since the stock market likes to go for short-term thinking, technically they are. He can't go to Mars etc. while complying with stock market expectations because his business would implode. So he does it anyway and they interpret his arrogance as dominance, which it is.
Tesla, Amazon, and Uber each have their own type of dominance behaviors with the stock market. Tesla is the visionary seeing the burning bush and unaware of anything the stock market says, and they command awe. Amazon is the hard-bargainer who understands what the stock market wants, but won't trade away their own power, and they command respect. Uber just acts the way the stock market wants to act, and they command love (from the stock market, at least: maybe not from anything human!)
The market doesn't want anything, nor does it have any awareness.
>Tesla's different.
The Musks of the world are rare, but we've seen many captains of indsutry in history.
>and are careful not to cross Musk.
That's why it has massive short interest, right?
Tesla (the company) is great. TSLA (the financial instrument) is a hyped up momo stock, detached from anything underlying. That's it. There's no magic. Sorry.
We as a species may die due to global warming, according to some models. Tesla is, by my measure, the tech company that comes closest to addressing this in any way. I couldn't care less about internal gossip and politics, I care about the greater vision. Politics are not business, they are an obstacle to business.
Why speculate? Wait and see.
You mentioned elsewhere in this thread[0] that you're concerned about global warming and "Tesla is, by my measure, the tech company that comes closest to addressing this in any way." Tesla has not yet succeeded in having a significant impact on global warming, much less transformed the automobile industry or the large-scale use of batteries. Whether or not they succeed is something that many are interested in, just as it seems you are. Tesla has very ambitious goals in terms of Model 3 production and many people have expressed doubts whether they'll be able to meet those goals. Missing those goals could have a significant impact on the long-term success of the company. To meet these goals, Tesla acquired the automation company of which Grohmann was the CEO. If the departure of Grohmann results in management difficulties or departures of other Grohmann Automation staff, this could have a significant impact on whether Tesla meets these goals.
A wait-and-see attitude can make sense if you're just interested in the outcome and don't think you have any stake or ability to influence the company or the industry. If that's where you're coming from, there's nothing wrong with that.
At the same time, if you're concerned about the long-term survival of Tesla, own Tesla stock, are perhaps interested in purchasing a Tesla, or interested in getting into the electric automobile industry or battery industry, or any other of a number of reasons, or purely from an interest in better understanding how changes like this can affect a company, or an industry, this can indeed be something that is important.
Sure, there's some gossip-like discussion. We should all do our part to improve the level of discourse. Dismissing or trivializing others' interest, however, is not one of them. Share your point of view? Sure. It can be a worthwhile contribution to get someone's perspective, and in my experience on HN, one that's generally well-received when it's thoughtful and well-considered. Expressing your "wait and see" attitude with respect to Tesla I'm sure is something that people can appreciate on its own, while remembering that there are others that may not share it.