Tesla's cash flow woes have some suppliers worried they won't get paid

Update August, 22, 2018: Comments on Tesla's financial risk from CreditRiskMonitor were added.

Dive Brief:

Tesla's suppliers are increasingly concerned they will not get paid, according to a survey conducted by Original Equipment Suppliers Association, an automotive supplier organization, The Wall Street Journal reported.
18 of 22 respondents to the survey said they consider Tesla presents a "financial risk" to their businesses and several reported that Tesla asked for an up to 10% reduction in price for their products. There is also some evidence in public records to suggest a few suppliers have taken Tesla to court on for lack of payment.
"We’re not behind because we can’t pay them. It is just because we’re arguing whether the parts are right," Tesla CEO Elon Musk told The Wall Street Journal on Friday.

Dive Insight:

Speculation that the electric car maker may not be in good financial health have been swirling for weeks after the company reportedly asked suppliers to return some of the cash they had been paid in July, and Musk tweeted about taking the company private in August.

In July, Bill Danner, at the time president of CreditRiskMonitor, a financial risk analysis and news service, told Supply Chain Dive, "we've seen a huge run up" in the amount of money due to suppliers. Danner went on to explain that most suppliers wouldn't have the capacity to delay terms enough to correct Tesla's cash flow problems.

Tesla's cash on hand is much the same today as it was in June, having fallen by $1.13 billion to $2.24 billion in the first six months of the year. According to internal Tesla documents obtained by The Wall Street Journal, today that number is closer to $1.69 billion.

But Jerry Flum, chairman and CEO of CreditRiskMonitor told Supply Chain Dive that Tesla's position in the eyes of risk managers hasn't changed much since April.

"The probability of bankruptcy is still between 2% and 4%. Now that's above normal for most American companies. It's elevated against the norm, but we don’t believe that this company is a high probability of bankruptcy," said Flum.

Musk and his CFO Deepak Ahuja admitted no concern to the Wall Street Journal, stating that forthcoming car deliveries will refill its coffers and even make the company "cash-flow positive and profitable" by the end of this quarter.

"People need to calm down about this and start to follow some metrics that make sense," said Flum.