April 17, 2017

Tesla’s plan to drop Tesla Advanced Automation Germany’s other clients and focus solely on the Model 3 production line has met with serious resistance. There are even threats of strikes at the German firm, but we don’t think it’s going to go that far.

Production of the Model 3 is due to start in three months and Tesla Advanced Automation Germany, which is the new name for the recently acquired Grohmann Engineering, is due to play a key role.

Fremont comes with limitations

Space is limited at the Fremont production facility, the Model 3 is a huge step up for Tesla in terms of mass manufacturing and the production line is going to have to work almost perfectly to hit Tesla’s ambitious goals and almost double the output that Toyota managed with the same factory.

Tesla has already said it will produce drivetrains at the Gigafactory, so the production line itself will be a complex beast and Grohmann Engineering has the experience to make it work.

The German company specializes in setting up production lines and previously worked with a number of different clients in a range of different industries. Now it has been forced to focus its efforts solely on Tesla and that does not sit well with the workers. They feel that a range of clients gives them a more secure future.

Money is another issue for  the workers

The workforce also wants a substantial payrise and the workers are asking for an average of €400 ($425) a month, while Tesla is offering €150 ($160) plus stock options.

Tesla has historically offered stock and, considering the company’s performance, it has always delivered solid returns. The German workers don’t seem willing to take a chance, though.

IG Metall Union representative Patrick Georg told German newspaper Welt am Sonntage:

“We got a response from the company, but it is not satisfactory. We will check whether strikes are an option.”

A strong position for the union

Approximately half of the company’s 680 staff are members of the union and if they opt to strike then it could really cause a problem. Of course, the union knows how important the Model 3 is to Tesla and so it has a strong negotiating position.

Tesla has missed deadlines before, but Elon Musk has made firm assurances with the entry-level car and it simply cannot afford any serious delays. Even if it caves in to the workers demands then we’re talking about spending €170,000 a year more on salaries than it wants to pay right now. That number is just not big enough to risk the bad publicity and customer service issues that would go with late delivery of the Model 3.

So Tesla will want to settle this dispute quickly, as it simply doesn’t need the distraction, and we’re sure that it will be dealt with before the workers start downing tools.

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