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Comment by jansan | Hacker News Reader

IMHO this is despicable business behavior of Tesla. As someone who worked at a very large European car supplier, I know that companies like Grohmann are build with the help of the big players (car manufacturers or bigger suppliers), who invest a lot of time and money to ensure that they get a reliable supplier for the future. Our purchase department had special people who helped several smaller companies in the Czech Republic to become suppliers able to meet the requirements of European car manufacturers. They would have never made it by themselves.

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.

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I'm curious, what do you believe is the minimum level of help a company must provide its suppliers in order to turn a competitor buying them out into despicable business behavior? Is simply being a long-standing customer enough? How long is a supplier that is provided help ethically required to continue supplying?

In my personal opinion purchasing a long standing supplier of many companies with the intention to remove it from the free marked is despicable already.

By analogy, would anyone who starts a business with the intention of selling it later (thus enabling the buyer to remove that business as supplier to his competitors) act in a despicable way?

No.

I'm by no means a fan of pure capitalism, but in this case, what's the problem? What you want doesn't look like a free market. What you want is an external force (universal morality? government regulation?) prohibiting a company (Grohmann) from being bought by a company (Tesla) that apparently offered an enticing deal, and then trying to negotiate out of existing contracts (has anyone accused Tesla of not honoring existing contracts? THAT would be different). The stakeholders of Grohmann evidently wanted to sell, and that's the only thing that matters in a free market. Once sold, Tesla determines how Grohmann (re)negotiates with its customers, and how Grohmann resources are utilized.

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.

I think the problem with it is that it's essentially exploiting a flaw in capitalism. The company would probably generate more total long term value if it continued to service multiple companies, but Tesla wants to capture as much of its production as possible. Humans aren't money optimizers, and almost everyone has a buyout price. Because Tesla has so much money, they can gain a competitive advantage by just buying out others. Tesla and the stakeholders of the company they buy win, while the overall health of the industry loses. Now all their other clients have to spend extra time and money to do what they were previously paying Grohmann Engineering to do, either by finding a new partner or doing it in house.

I'm more of the opinion that if the existing customers were concerned enough, they could have found a better solution. Forming a consortium doesn't seem too far off. Of course now i'm speculating with somebody else money, but I also believe somebody run the numbers. Strategy is basically about running numbers continuously about every possible scenario.

Interestingly, in some industries it's a common tactic (among the less reputable?) for disrupting rivals.

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?

Many people still consider it shady, despite the fact that it's been common practice for so many years. No one is ever surprised anymore, but perhaps this is one of those trends that shouldn't leave the software industry.

That is just business practice in the US. This is exactly why American businesses are so dynamic, because they view business as competition rather than cooperation. This is how the free market and the invisible hand actually works.

And they would never cash in huge profits if it were not for 3x cheaper Czech labour, land and huge incentives from local govs. Why do you think those suppliers owe anything to anyone? Big players that helped those small suppliers are the same as Tesla in this case.

Exactly. They certaintly didn't fund the company out of interest of the Czech employees. Somebody ran the numbers and thought it could be a profitable investment.

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.

He sold his company. Tesla could have killed it just to deny its competitors assembly line equipment. We are talking American business ethics here, not German business ethics. If it was that critical to them, BMW and Diamler could have instead jointly bought Grohmann Engineering, like they did with Here Intetnational BV stock along with VW.

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