Union Troubles

Inside the Tesla sweatshop

Tesla Motor Co’s Plant As Production Of The Model S Speeds Up
Factory workers like the idea of working for Tesla, but not the conditions. Source: Bloomberg

On a summer evening in Fremont, California, all the glamor of Silicon Valley is mobilized to launch the Tesla 3, the car meant to bring electric vehicles to the mass market. Elon Musk, Tesla’s founder and CEO, personally hands over the first 30 production models to their new owners. But in his speech, Mr. Musk shocked listeners with his dark mood: “We’re going to go through basically about six months of manufacturing hell.”

By now, it is clear that Tesla has bitten off much more than it can chew. Production is nowhere close to achieving Mr. Musk’s ambitious targets. By the end of September, just 260 Tesla 3s had been delivered: far short of the promised 2,500. Until very recently, the Tesla 3 was being screwed together by hand – its production lines had not yet been completed.

Tesla has had problems in the past, as executives and workers rushed to keep up with Mr. Musk’s wild promises. But with the Model 3, things may have gotten out of hand. On the cusp of a new future and potential profitability, Tesla has struck fear into the hearts of German powerhouse carmakers that are slowly waking from their own slumber. But it has also been caught up in an old story of low standards and exploitation.

“For a period of 10 months, we had to work 12-hour days, up to 72 hours a week.”

Juan Maldonado, former Tesla assembly line worker

Juan Maldonado knows all about Mr. Musk’s “manufacturing hell.” The 48-year-old assembly-line worker toiled for four years in Tesla’s Fremont factory. “For a period of 10 months, we had to work 12-hour days, up to 72 hours a week,” said Mr. Maldonado, who assembled batteries for Tesla’s S and X models.

Owen and Demetric Diaz are also veterans of Tesla’s assembly line with a low opinion of Mr. Musk. The two African-Americans, a father and son, claim they were systematically racially abused in the Fremont factory, but management did nothing. They are seeking compensation through the courts.

Since its foundation in 2003, Tesla portrayed itself as a radical new force in the automotive industry. Although it continues to lose money, its share price has shot up. Tesla now has the largest market capitalization of any car company in the United States. Many analysts see it as basically a technology company, like Amazon or Google, with rapid growth bringing heavy early losses, until the effects of scales kick in and the competition is wiped out.

But the company’s rapid rise has left some workers feeling left behind. In the Fremont factory, trouble has been brewing for some time. For over a year, the powerful United Auto Workers union (UAW) tried gaining a foothold. The company is accused of intimidating labor organizers, although it vehemently denies this. But Tesla laid off 400 workers in October, and now the UAW has taken a case on their behalf to the National Labor Relations Board. Preliminary hearings are due this month.

WirtschaftsWoche (a business weekly and sister publication to Handelsblatt) spoke to Tesla workers who want to join a union. They are nervous, insisting on anonymity before telling stories of stress and low pay, compulsory overtime and non-disclosure agreements. Silicon Valley’s appalling traffic terrifies them – arrive late for work and you could easily lose your job.

Production line workers envy the astronomical salaries paid to engineers and algorithm whizzkids, saying they build the cars and have nothing to show for their labor. They also resent Tesla’s German staff. When Tesla took over German automation specialists Grohmann a year ago, its unionized workers got a pay rise and stock options.

Mr. Maldonado says he used to be proud to work for a cutting-edge company. But no more: He was laid off in October, ostensibly because of two late arrivals. Now he regrets working so long for so little. When he lost his job, he was making $20.50 (€17.60) per hour. The average auto worker’s wage in the United States is $25.58 per hour, according to the UAW. And most assembly line workers do not live in overpriced Silicon Valley.

Before Tesla, the factory belonged to a joint venture between General Motors and Toyota, building Chevrolets and Pontiacs under Japanese management. Until it closed in 2010, Mr. Maldonado built Toyotas here for $31 per hour. “But it wasn’t just better money,” he says. “Relations with the foremen were a lot more chilled out too.”

Elon Musk says the traditional car industry is using labor unions to destabilize his company.

Not everyone is angry. “I am proud to work for a world-famous company,” says an assembly line worker. He says a small minority of agitators are responsible for the trouble. Mr. Musk agrees. In fact, he goes further, claiming that the traditional car industry wants to drive him out of business, and is using the UAW to destabilize the company. In a recent email to staff, Mr. Musk said Tesla workers hired four years ago have earned $70,000 to $100,000 more than workers at Ford, General Motors or Fiat-Chrysler in that period.

In Fremont, Mr. Musk’s claims bring cynical shrugs. Workers here remember his promises of “more fun things,” including free ice cream and a factory roller coaster, neither of which materialized. There is also skepticism about his comparison to other car workers: His calculation only applies to workers who acquired stock options at just the right time to benefit from the share price surge.

Mr. Maldonado says many workers did receive options. “But we sold them as soon as we could, because we need every extra dollar just to live,” he says.


This article originally appeared in WirtschaftsWoche, a sister publication to Handelsblatt. To contact the author: innovation@wiwo.de

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