Not to dismiss the issues here, but the entire American automotive sector works like this.
It's practically standard policy for OEMs to stiff smaller vendors with flagrant disregard for their obligations, because every day of delay and every dollar they don't have to pay is more margin for the OEM. In many cases it doesn't even matter if doing so it's detrimental to the long term health of the OEM, as happened during the COVID supply shocks. Finance gets their way.
As an engineer, I've found out from more than one vendor that the delivery I was expecting to start production isn't happening because finance just decided they didn't want to issue payment.
97b in revenue per year. 10% of cars is made by suppliers, so maybe 9b goes to suppliers. 750m of liabilities per month. There's going to be millions hanging out there perpetually. AKA normal for every large business.
p.s. Tesla is not indebted like every other business (10-15x less debt, 5-6x more cash), so interest doesn't really count for them.
I think this needs to be understood by more people, and as a society, we need to start acting against these practices (e.g. by collectively blacklisting organisations who do not fulfil their obligations).
After working at small companies most of my career. Anytime someone angrily states that little people must pay their bills or else I reflexively think about how much corporate America does not. Really common they'll withhold the last payment until they need something else.
I keep coming back to a study I read a long time ago where they administered college students a test to score sociopathy as freshmen and again as seniors. Not surprising seniors scored lower then freshmen, except business and economics where they scored a lot higher. Makes me more receptive to the old school idea that college is partly there to provide a moral education.
The big tier ones (Bosch, Continental, etc) insist on payment up front specifically to avoid this. It's the smaller vendors that don't have leverage to set payment terms who get screwed.
One tactic I've seen OEMs use is to buy for multiple products and stop payments for one as a test. If the vendor complains, they lose all the unrelated business (possibly including clawbacks!) and the OEM moves to the second source. This can kill the supplier.
As a small player in the services game (data consulting) the only way to do it is to have good relationships with the people paying the bills. Even with good agreements, you still need the client to be on your side.
Look, I get it, I was starting out once, and out of necessity did some "high risk" work where we invested a lot of time before getting paid. Sometimes it worked out, sometimes it failed.
I learned to understand that -risk- has a value. All transactions have risk, maybe I don't deliver, maybe you don't pay.
I now explicitly factor risk into quotes. We can share risk (you pay some, but not all, up front, coupled with progress payments), or I can take the risk (I'm pricing it higher, and assuming you're skipping the last payment), or you can take the risk (pay up front, but pay less.)
Treating risk as a line-item in the budget helps both parties understand the pricing better. Having a track record (of paying or producing) helps the other party accept more if the risk.
I've had some clients prove to be unreliable payers. For them I accept no risk. All work us done on a "pay first" basis. Some choose to find another supplier. I don't consider that a loss.
If you keep working, you still run the risk of never getting paid — in which case your lost investment would be more time and money than it would've been if you'd stopped after the first unpaid bill.
State governments do this too. NY under Cuomo just dictated a 10% cut to invoiced labor. It was widely understood that saying no meant no more work in the future.
"You" (not you) already took a risk which failed. Now you are talking about taking on more risk with the same person who cheated you, like a lallu (Hindi term for a sucker)?
You're promoting wrong ideas, which are harmful to everyone here who is a supplier.
For software related things, if it stops working, you will then get paid immediately to fix it. That's when you get paid, fix it, and never work for them again.
One wonders if this is merely the age of information, and during "the before times" the rich people really sucked too.
Soap box:
Having A LOT of money can suggest to a person that Everyone Else's Rules Do Not Apply To ME. Because they don't, largely. The trick is not letting that idea infest your mind with fallacies, such as YOUR Rules Do Not MATTER.
I'm curious how this works over time. I read somewhere (would have to search to find it) that after Trump became notorious for stiffing small contractors on his properties, the wisdom them became you just quoted a ~50% premium, because you knew Trump would only pay you 2/3 of what he originally said he would.
But agree with your statement, which is why I always gag a little when I see working class people lionize these two as "champions of the working man".
Similar psychology, too, and extremely similar backstory: a truly dreadful, cruel, selfish man for a father. Fred Trump would have found a lot in common with Errol Musk, and they both did a lot of emotional damage to their sons in their early years. They are fully the products of emotional damage in early childhood.
(Musk has the small advantage of being able to express his feelings about his father’s behaviour; Trump still worships his)
Readit News
It's practically standard policy for OEMs to stiff smaller vendors with flagrant disregard for their obligations, because every day of delay and every dollar they don't have to pay is more margin for the OEM. In many cases it doesn't even matter if doing so it's detrimental to the long term health of the OEM, as happened during the COVID supply shocks. Finance gets their way.
As an engineer, I've found out from more than one vendor that the delivery I was expecting to start production isn't happening because finance just decided they didn't want to issue payment.
p.s. Tesla is not indebted like every other business (10-15x less debt, 5-6x more cash), so interest doesn't really count for them.
I keep coming back to a study I read a long time ago where they administered college students a test to score sociopathy as freshmen and again as seniors. Not surprising seniors scored lower then freshmen, except business and economics where they scored a lot higher. Makes me more receptive to the old school idea that college is partly there to provide a moral education.
One tactic I've seen OEMs use is to buy for multiple products and stop payments for one as a test. If the vendor complains, they lose all the unrelated business (possibly including clawbacks!) and the OEM moves to the second source. This can kill the supplier.
The winning move is not to play.
I learned to understand that -risk- has a value. All transactions have risk, maybe I don't deliver, maybe you don't pay.
I now explicitly factor risk into quotes. We can share risk (you pay some, but not all, up front, coupled with progress payments), or I can take the risk (I'm pricing it higher, and assuming you're skipping the last payment), or you can take the risk (pay up front, but pay less.)
Treating risk as a line-item in the budget helps both parties understand the pricing better. Having a track record (of paying or producing) helps the other party accept more if the risk.
I've had some clients prove to be unreliable payers. For them I accept no risk. All work us done on a "pay first" basis. Some choose to find another supplier. I don't consider that a loss.
Eff, what kind of sucker [1] are you?
"You" (not you) already took a risk which failed. Now you are talking about taking on more risk with the same person who cheated you, like a lallu (Hindi term for a sucker)?
You're promoting wrong ideas, which are harmful to everyone here who is a supplier.
You need a principle from Econ 101:
Animats is right.Soap box:
Having A LOT of money can suggest to a person that Everyone Else's Rules Do Not Apply To ME. Because they don't, largely. The trick is not letting that idea infest your mind with fallacies, such as YOUR Rules Do Not MATTER.
Not just in USA but many other countries too.
The news is full of stories about him settling cases because his actions were either illegal or in breach of contracts.
He comes across as supremely arrogant—someone who refuses to play by the rules and probably never will.
At this point, if you extend him credit or don’t demand full payment up front, that’s on you for trusting him.
https://www.nbcnews.com/politics/2024-election/cities-seek-7...
https://www.usatoday.com/story/news/politics/elections/2016/...
But agree with your statement, which is why I always gag a little when I see working class people lionize these two as "champions of the working man".
(Musk has the small advantage of being able to express his feelings about his father’s behaviour; Trump still worships his)
Deleted Comment