Tesla’s real capacity problem? Too many employees
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Tesla CEO Elon Musk said last week the company has run out of space at its Fremont, Calif., plant and is looking to build a 2nd factory.
“There’s no room at Fremont,” Musk said. “It’s bursting at the seams.”
But that statement left slew of industry watchers scraping their goes.
Tesla’s Fremont plant is the old Fresh United Motor Manufacturing plant, otherwise known as NUMMI. The joint operation inbetween General Motors and Toyota began in one thousand nine hundred eighty four and was intended to help the Japanese automaker learn about doing business in America and train GM the principles of lean manufacturing.
The plant, thirty two miles from Tesla’s headquarters in Palo Alto, is large enough to treat around 500,000 vehicles a year in Five.Trio million square feet of office and manufacturing space. Tesla, meantime, produces about a fifth of the plant’s capacity.
Tesla
We visit the Tesla Factory, formerly Fremont Assembly and NUMMI
I grew up on the east side of San Francisco Bay, about thirty miles north of the Tesla assembly plant in Fremont, and it gives me a certain sense of pride that cars are still being built in the East Bay .
So what gives? Why is the electric-vehicle manufacturer running out of room?
It’s because in this temple of lean manufacturing, Tesla uses far more workers than NUMMI employed to build far fewer cars. In 1985, its very first utter year of production, NUMMI had Two,470 employees and produced 64,764 vehicles — about twenty six vehicles per worker per year. By 1997, it had Four,844 workers and produced 357,809 vehicles — about seventy four vehicles per worker per year.
Tesla, on the other forearm, had inbetween 6,000 and Ten,000 workers in two thousand sixteen and manufactured 83,922 vehicles. That puts its vehicle-per-worker number inbetween eight and 14, about one-seventh the efficiency of NUMMI at its peak.
“The number of people Musk’s got in there has a superb deal to do with why he doesn’t make money building vehicles,” said automotive manufacturing consultant Michael Tracy of Agile Group in Howell, Mich. “Toyota’s numbers reflect the number of people you expect to have if you were going to efficiently build vehicles for a profit.”
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Tesla’s plant is so perplexed with workers, employees have to fight to find space for their cars. Musk said on Tuesday that parking at Fremont has been a major problem, and that recently, employees “practically had a riot” over attempting to find space.
In a latest Wall Street Journal report, one former Tesla recruiter said some employees would make deals with workers on other shifts to hold parking catches sight of for them, paying in cash or cigarettes or bartering. The story cited an Instagram feed that highlighted the parking problems in the Tesla employee lot. The feed was taken down for a while but has been resurrected, and shows SUVs sitting atop parking lot dividers and cars parked utterly close together.
Tesla, which declined to comment for this report, has added many workers in the past year as it attempts to quickly ramp up production.
The Fremont factory assembles the Model S sedan, Model X crossover and the soon-to-launch Model Trio. Musk said the upcoming Model Y will be built in a separate factory.
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In Tesla’s fourth-quarter earnings call in February, Musk said that once the Model three launches, he plans to begin producing Five,000 vehicles per week in the fourth quarter, and ramp up to Ten,000 vehicles per week by 2018.
“Going from 100,000 to 500,000 units is a fat leap for any company,” said Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions. “For them to build a half a million units next year, it would be an amazing ramp-up for what is still a startup company. There’s all kinds of crimson flags.”
When the plant was NUMMI, GM executives worked alongside Toyota executives and attempted to soak up as much information as they could about how the Asian automakers worked. Many traveled to Japan to tour Toyota’s Takaoka plant to observe the difference inbetween American plants and Toyota’s. There, the executives spotted clean plants where workers had autonomy to stop the production line if they spotted a problem. That way they could fix the problem before passing the vehicle to the next worker.
Several high-level executives made their starts at NUMMI: John Krafcik, former head of Hyundai’s U.S. operations and now CEO of self-driving car company Waymo; former Chrysler CEO Tom Lasorda; and Mark Hogan, who held several senior executive jobs at GM and is now the only foreigner on Toyota’s board.
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Another concept that flowered at NUMMI was just-in-time production, where suppliers produce parts to the plant just before they are needed on the production line. That saves the plants from having to store parts, reducing waste and inventory costs.
Tesla is taking its own treatment to manufacturing. Mike Ramsey, a transportation and mobility analyst at Gartner Inc., said Tesla does a lot of things itself that other companies forearm off to suppliers. It makes its own seats in the Fremont plant, assembles battery packs on-site and houses hundreds of engineers in Fremont.
“That’s the reason why the parking lot is overflowing,” Ramsey said. “When the Model three goes in, I have no idea where people will park.”
Additionally, the bod shop and many assembly functions are not on a traditional production line, he said, and they take up a lot of floor space.
Tesla acquired the Fremont plant for $42 million in two thousand ten after GM went bankrupt and Toyota determined to sell its stake in the plant. Since then, Tesla has leased the neighboring 500,000-square-foot building that formerly housed defunct solar company Solyndra and has been approved by local regulators to increase the operation’s campus by Four.6 million square feet.
