Former Fisker And Volt Boss Tony Posawatz Has Some Advice For Tesla

NOV 13 2014 BY JAY COLE 47


Tony Posawatz has been around the auto industry a long time, and has some questions about Tesla’s viability plan for today – but also has some advice for the future.

Tony Posawatz Offers Some Advice For Tesla

Tony Posawatz Offers Some Advice For Tesla

Before taking the reigns at Fisker Automotive (at exactly the wrong time), he was known as a GM “lifer”, with 30+ years  at the company, serving the last six years as the “Vehicle Line Director” for the Chevrolet Volt.

His exit at GM was brought on in part by the great brain trust exodus that took place shortly after the original Volt was launched – most likely due to a behind-the-scenes culling of the herd and apparent R&D work stoppage on the technology that was happening at the time.

When speaking to Benzinga in late October, Mr. Posawatz underlined Tesla’s historical reliance on selling ZEV (zero emission vehicle) credits to get their number into the black.

“As one looks at Tesla, I do have some general concerns around their ability to make a profitable model that’s a high-volume model. And I think, if you look at their dependence currently on the ZEV credits for revenue and profit…it is not a business model that I think is sustainable.”

List Of Credit Sellers Over Last 12 Months

List Of Credit Sellers Over Last 12 Months

And while at the time, his statement might have been looked upon with a fair amount of skepticism, almost prophetically a few days later Tesla reported a surprise 3rd quarter net profit of 2 cents a share or $3 million dollars (non-GAAP) after unexpectedly booking $76 million dollars worth of ZEV credits.

The sale of regulatory credits has pushed Tesla profits into the black before, with the company netting hundreds of millions of dollars since inception on the practise.  That regulatory  transaction is expected to be monetarily fruitless in the very near term as more OEMs finally get their “compliance” vehicles on the road to fulfill ZEV credit requirements, while other automakers such as Nissan begin to sell their excess stockpile, theoretically flooding the market.

Mr. Posawatz felt that Tesla should be focusing more on high volume offerings over new high end products like the Model S P85D.

“I would have preferred … for Tesla to provide news not for a higher priced car, because the air gets thin up there relative to the number of potential customers in line, but to show signs of driving costs out of the car, and progress into make the lower cost, high volume electric vehicle, which I think is the key to their future success.”

The former Chevy Volt/Fisker boss also had a suggestion we think does make a lot of sense – specifically for Tesla to find an automotive partner to share the costs of common parts and leverage their existing volume production.

“This is an industry that requires a lot of capital, and scale does matter as it relates to trying to get your costs down. If you’re buying a million steering columns, it costs you a hell of a lot less than if you’re buying a few thousand steering columns.  So I do believe one key element that could lead to greater success for Tesla in the future is increased partnering in how alliances are formed…Tesla can benefit from scale of  partners.”

Benzinga

Categories: Tesla

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47 Comments on "Former Fisker And Volt Boss Tony Posawatz Has Some Advice For Tesla"

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taser54

Good points. Of course, some will attack him for the comments.

Rob Stark

Because his comments are either stupid and/or obvious.

ZEV credits are a small part of Tesla’s revenue. It is the icing on the Model S cake.

Tesla can walk and chew gum at the same time. It can devote a small amount of resources to make a higher profit version of the Model S like the P85D.

pjwood

Celebrating high-margin limited production P85D’s, while expecting but not seeing Model Xs and IIIs, is a weird way for an investor to walk and chew.

Taser54

If obvious comments are to be criticized harshly, as you seem to proffer, there are a ton of comments from Musk that you need to start blasting.

Mint

As Rob said, his points are either stupid, obvious, or shortsighted.

Tesla *already* benefits from partners building many parts for them:
http://www.autonews.com/assets/PDF/CA843311210.PDF

The Model X *is* higher volume, and as high volume as they can handle.

The P85D *is* about higher sales and profit. It’s a halo car like BMW’s M3/M5 that sells the entire brand. Autopilot is important too.

The gigafactory *is* about higher volume.

And EV credits are a small part of Tesla’s income. This year it’s probably under 3%.

Aaron

I believe Tesla makes use of many Mercedes Benz parts, specifically interior switch gear. Could they benefit from sharing more parts? Of course, but they’re doing some of it right now.

Dr. Kenneth Noisewater

Besides, Tesla owns its center stack and even makes its own logic boards for it, and as a result, has the best infotainment system on wheels. For them it’s as core a competency as battery assembly, while legacy automakers still bid out for clunky, poorly-integrated junk. A car’s UI is what most owners interact with most of the time, and Tesla gives it the respect and attention to detail it deserves.

sven

Ford has belatedly learned that lesson. People hate Ford’s Sync infotainment system so much they plan to sue Ford. Ford is finally overhauling Sync by dumping Microsoft and replacing them with Blackberry.

http://jalopnik.com/people-hate-fords-infotainment-system-so-much-they-plan-824376438

http://online.wsj.com/articles/SB10001424052702303887804579503863581362666

Mike

Ford got sold out by Mullally.
Mullally was looking for a Microsoft job while running and ruining Ford. Under Mullally were did “Quality is Job 1” go?

Probably the worse Ford CEO in recent memory.

James

Ford didn’t need government bailout. Instead, lead by Mulally, Ford uncomfortably extended it’s debt limit a couple years ahead of the economic downturn. Considered a mighty risk at the time, it turned out to be a stroke of genius.

I wouldn’t say Mulally was a bad CEO, far from it. SYNC literally set the tone for all other infotainment systems to come. Ford profits mightily in per-unit profit due to upselling SYNC. It was another big risk that paid off. Being first – Ford took it in the shorts in customer satisfaction. Other automakers saw the flaws, and sought to perfect them. I don’t see how this makes Ford stupid, or making crooked inside deals to cozy up to Microswift.

James

As I read it, Mulally convinced Ford’s execs and banks to increase debt based upon the strength of upcoming models as collateral.
It worked. GM and Chrysler died. Ford did not. Very high risk that resulted in very strong reward.

Dr. Kenneth Noisewater

It may be an improvement (hard to imagine it NOT being one), but I have to wonder what percentage of Ford employees are UI/UX engineers vs Tesla. Or, how much XP Blackberry/QNX have in auto UI design that’s driven by delighting users vs. integrating disparate assemblies.

Dr. Kenneth Noisewater

Perhaps, but you can’t have scale to buy a million steering assemblies or windshields if you don’t have a million vehicles worth of batteries. First things first.

Dan Hue

The idea is to save money by buying parts from an OEM that already sells millions.

Dr. Kenneth Noisewater

Which Tesla already does for a number of components. So I guess Posawatz’s point is even more off?

It’s particulalry clueless that he mentioned steering columns, not knowing that Tesla gets those from Mercedes.

James B.

Here, I’d have thought his #1 suggestion would be to make sure your unsold autos that sit on a lot near a hurricane hits are properly insured via ironclad contract in your favor.

Whatever

The failed company is giving “advice” to the successful company? Okay…

Tesla is in a state of rapid expansion, it’s hardly surprising that their profits are weak or non-existant. Everything they make is going back into the company to expand it.

Considering his record…

gsned57
As a tesla investor (small $$$ but I’ve been one for almost 2 years) I don’t look at the ZEV credits at all in my analysis of the company. Tesla is still in the beginning phase. They’ve made 1 product on their own so far. I think the Model X is the right variant to release next but my concern is that they are deviating too much from the Model S. The model X should use the Model S chassis, powertrain, systems, and recycled software. Only the body and the interior on the Model X should be different. My only concern is that with all this development time they are reinventing or tweaking too much on the Model X. Commonality saves $$$ and with a home run like the S they should keep as much common as possible. If you have an SUV model it needs to have AWD at least as an option and I think the S85D fits into the development of the Model X. In addition to the X they are developing the Model III which is going to be a costly development program. Personally I am suprised that they are essentially breaking even every quarter with… Read more »
Ed

Regarding his example, doesn’t Tesla already use Mercedes steering columns?

ffbj

Good point. They just buy them stock and badge them, so the one component he mentions is an exception to the example he is trying to make.

Being an insider and so knowledgeable you would have thought he would have known that.

ffbj

This seems a bit like damning with faint praise, incidentally both companies he worked at/for failed. GM went bankrupt in 2008.
One thing he says is Tesla lacks the economies of scale and then when the giga-factory is brought up, whose profit is almost entirely based on economies of scale, he thinks that won’t work.
He is in the old model of the auto industry, which as we well know has immense problems.

Yes you can get a good deal on ignition switches by buying millions of them, but recalling and replacing millions of them is going to cost you. Not to mention the wrongful death lawsuits, because they covered up the problem. I don’t think Tesla has had one of those wrongful death suits leveled against them, can Ford, GM, Toyota etc… say the same?

Bonaire

The new model of auto industry has not been proven yet. Could Tesla succeed without hiding numbers, taking hundreds of millions of ZEV money and having wall street ramp its stock price to entice more buyers into the fray? Lots of interesting angles to this “new” auto industry. It is not much different than the old Saturn dealership network of no haggle selling pressure which worked. For a time. I suspect the D was meant to get two new types of sales. Model X buyers brought forward to now. And P85 and + owners who must trade in to have the latest toys. It is working for now. But some cracks seem to be showing already…

Stimpacker

Putting the merits of his comments/advice aside, I generally feel that “Lifers” such as Mr Posawatz are not the people you turn to if you’re looking for creative thinking or innovation because of all the years spent (probably fresh out of college or even as intern) working for just 1 employer.

I worked the Silicon Valley startup circuit before I joined my current Fortune 50 employer. The “Lifers” I have encountered so far are very ingrained in their ways. I won’t bother with tons of examples. Let’s just say that making progress can be frustrating at times.

Lou

I think what has not been clarified and probably needs to be is: What kind of automaker does Tesla want to be? One for luxury, high end EV’s(only), or one that markets for the masses, with a variety of car types,battery sizes, etc. Tony’s advice is probably good, because Tesla knows that they need to diversify and reduce their costs, as many have noted. The credits have been a life line to Tesla, and they know the days of the ZEV credit sales are about to end. However, that gave them an unfusion of cash and should help them move forward with R&D costs as well as production costs. Let’s give Tony a break, I didn’t take his comments as condescending nor an attack on Tesla, but he has a unique view having been with the Volt and at Fisker. He hardly caused the problems at either company, could not have made any real difference from what I can see, given their circunmstances.

Lou

Dan Hue

BMW and Audi manage to sell cars in a wide range of prices. They both have good technology and strong brand appeal. Can Tesla get to that breadth and size? It would be great, but a tough road ahead for sure. It’s just the MS so far.

Martin B.

As for the “Tesla depends on ZEV credits for revenue and profit.”

Fisker went bankrupt and GM was saved by governments to save thousands of jobs. Is that what they call a sustainable business model?

Aaron

Heh. Seems that Fisker’s ZEV credits didn’t keep it afloat, so why would Tesla’s ZEV credits keep them afloat?

Martin B.

Because Fisker never sold much cars anyway?

sven

Tesla’s nonexistent battery swapping stations allow them to earn 7 ZEV credits per BEV they sold, instead of only 4 ZEV credits. That works out to over $100,000,000 worth of extra ZEV credits for the nonexistent battery swapping stations. Tesla will keep those ZEV credits even if they eventually open only one battery swapping station at Harris Ranch, and that station can only be used by a few Teslas that are part of a limo/town-car fleet.

http://wattsupwiththat.com/2014/03/12/analysis-tesla-may-have-made-over-100-million-off-the-carb-enabled-battery-swap-scheme/

Sven,

Tesla no longer gets the 7 credits for battery swapping, as that was rescinded by CARB.

Fisker never got ZEV credits because they never built a ZEV.

Breezy

Well, some predictable bashing going on here. These are very reasonable comments that are not overly critical of Tesla. Some people react emotionally to anyone who dares criticize anything Tesla is doing.

I disagree with him about the ZEV credits. They are a small part of Tesla’s revenue now and will get proportionally smaller.

But I absolutely agree with him that Tesla is focusing too much on the ultra-high end of the market. That market gets saturated very quickly. The P85D is a step sideways at best.

I wonder if anyone can tell me how many of the first $25,000 Plasma TV sets Sony sold, when they brought them out back in about 2001, and if people considered that in 13 years you would be able to get one for $500! Of course, Tesla could make a model S today, with a 24 kWh battery, no Supercharging, stripped model, before options, and price it just above a LEAF, at about $39,000 – but could they get volume orders? (It would likely get about 4 miles / kWh, or about 96 miles Range tops!) Remember, the 160 miles range (Tesla, not EPA Range, so EPA range likely about 145 miles), basic Model S, had a 40 kWh Battery pack, and sold for $57,500, or $50,000 after Federal Tax Credits, so a 24 kWh pack model could be about 1/3 less, or so, maybe even as low as $35,000 after tax credits. But – if you could not get supercharger access, or maybe not even DC Quick Charging Access, would such a package have any more attraction than the current Ford Focus EV? According to Tesla Motors, the 40 kWh Model S, with no hope of Supercharger Access, and… Read more »
MDEV

Talking about the auto industry, Jaguar has survived producing high end cars 40K up at low volumes, the worse time for Jaguar was under Ford and the production of a cheap Jag X type model. Yes economies of scale works if you are Toyota, GM but there other brands “Europeans” than manage a good business with few models options and mid range price. Elon wants to be at the level of brand prestige. in fact Tesla is already there, that is why people is spending around 100K for Tesla brand because represents quality and prestige equal to the German auto industry. It took decades Mercedes and BMW to achieve where they are today.

Marcus

It should be quite obvious that tesla’s approach is unique to them and as such, who would they be able to scale the key cost components with. The plan in the end is to become the platform for others, scale in reverse.
The battery cast it seems 25% of the vehicle. I suspect but can’t prove that they will cut the cost by more than half with scale, incremental innovation, and vertical integration.
we’ll see…

DonC

Harvard MBA points out that if you can’t make money selling a $100,000 car your chances of making money selling a $50,000 car are not good.

Telsa Fanboydom goes crazy. Ba ha ha ha ha ha ha!!!!

Dr. Kenneth Noisewater

You know how a growth company works, right? It takes whatever money it earns and plows it right back into the business in order to grow it, until such point it transitions into a mature business that pays dividends (which is no longer a growth business). Tesla’s growth phase is not even at the end of the beginning.

How many other automakers are actually _growing_ capacity at this time, rather than trying to shed it or shift it to low-cost countries? The concept of an automotive company as a growth story has been inconceivable for at least 30 years.

ffbj

Exactly, and since current percent of pure ev’s in world fleet of cars is less than 1%, there is lots of room to grow.
Though the analogy is not perfect think McDonald’s in 1950.

koz

Now I better understand Mr. Posawatz’s decision to leave GM for Fisker

What does Tony P. do now?

ffbj
James

Was Tony ousted from GM or did he leave for the opportunity to move up as a CEO?

If he left, it was not the best decision, to be sure.

For Posawatz to “warn Tesla” sounds a bit more like sour grapes than words of wisdom.