Tesla’s future depends to some extent on the success and failure of its mass-market Model 3 car. Therefore, the company is leaving no stone unturned in the quest to make it a hit, even if it means handing out big rewards to executives.
Tesla incentive plan for McNeill
Jon McNeill, global sales and service president, will get a $700,000 bonus if he achieves certain targets, the company said Wednesday. McNeill will be compensated in cash, stock options or restricted stock units.
Under Tesla incentive plan, McNeill will be eligible to receive the amount if he is able to achieve his vehicle delivery target in the third and the fourth quarters of this year, according to a regulatory filing. The payout will also be based on operational and financial metrics related to vehicle service performance and cost and customer satisfaction scores in 2017, notes Reuters.
Why the Model 3 car is important for Tesla
All eyes are on Tesla’s upcoming quarterly earnings and delivery reports. Wall Street is pretty optimistic on the Model 3 car. The mass-market vehicle is seen as a potential game changer that has the capability to take the cash-burning company into profitability. The new Tesla incentive plan will certainly help motivate management to improve their financial numbers.
According to Moody’s, Tesla’s liquidity position will not be a problem in ramping up production of the Model 3 car. Moody’s analysts believe that Tesla will reach breakeven in 2018 if it achieves a Model 3 sales target of 300,000 units with a gross margin of around 25%. However, cash flow will still be negative at this level due to the two-fold increase in capital expenditures from around $1.5 billion in 2016 to $4 billion by 2017.
According to Moody’s, the coming 6 to 12 months will be crucial for the company. If Elon Musk can lead the company to achieve its production targets, the company’s outlook will get a boost. On the flip side, if Tesla fails to achieve the target, investors will probably start losing confidence in the automaker, and the 2019 maturity of approximately $900 million of convertible notes could require an additional capital raise at terms that may not be as favorable as the most recent issue, notes InvestorPlace.
Compensation issues with factory workers
While Tesla seems to be quite generous in compensating top management for their hard work, it seems the same policy does not trickle down to the bottom. In the beginning of the month, a group of Tesla workers sent a letter to the company complaining about employee safety and compensation issues. The letter was sent just three days after the company launched the much-anticipated Model 3 car.
The organizing workers’ committee is looking to form a union at Tesla’s factory in Fremont. The committee notes that Tesla’s safety record is worse than those of “sawmills and slaughter houses.”
In their letter, the committee stated, “Accidents happen every day. Severe incidents frequently impact morale and cause delays in production. We are losing great workers … recovering from preventable injuries.”
In pre-market trading today, Tesla shares were slightly down. Year to date, the stock is up more than 65%.