Tesla (TSLA) is not paying its bills, and this has led to at least two small American businesses going bankrupt. The automaker had over $110 million in liens with contractors over the last 5 years.
CNN released a new report that examines lien claims from contractors hired by Elon Musk’s companies in Texas, particularly Tesla.
In Texas, contractors have filed liens for more than $110 million against Tesla in the last five years. Over $24 million is still allegedly owed to dozens of businesses, according to the report.
In two cases, contractors, most often small American businesses, had to file for bankruptcy due to the unpaid bills.
The report highlights the example of a small pipe welding business that landed a multi-million-dollar contract with Tesla to build the Gigafactory Texas in Austin in 2022.
The owner, Jennifer Meissner, dedicated her whole crew to the project for a year, hired more people, and bought new equipment for the project, including some with loans she guaranteed herself:
For the first seven years Meissner’s company was in business, she prided herself on not once being late to pay her workers, she told CNN. After securing the business deal with Tesla in 2022, she said her company’s annual revenue grew exponentially, and she hired even more employees. With business booming, she was also hopeful that she would finally be able to start setting aside money for her special needs daughter, whom she adopted at the age of seven.
Her dream quickly turned into a nightmare when Tesla stopped paying its bills. It started putting incredible pressure on Meissner’s company, leading her to take more loans, thinking that Tesla would eventually pay.
Eventually, it led to her inability to pay her own employees and subcontractors, and ultimately, it contributed to her own bankruptcy.
Tesla ultimately paid $650,000 to cover her subcontractors, but claimed it was “overbilled.”
Another local small business, Full Circle Technologies, found itself in a similar situation after Tesla didn’t pay them $600,000 for installing security systems at the factory:
In bankruptcy filings, Full Circle Technologies said Tesla owed it nearly $600,000 and that it was “forced to take on short term high interest loans to bridge the gap between performing the work for Tesla and the payment for its services.” When a creditor began to levy the company’s bank accounts, the company said it had no option but to file for bankruptcy. Tesla then made its own claim in the bankruptcy hearings, stating Full Circle actually owed the carmaker money for allegedly breaching its contract. The two companies ultimately settled, but Full Circle CEO Abheeshek Sharma told CNN that Tesla was released from its obligation without paying a cent.
Another case involved Sun Coast Resources, a company that delivered fuel to Tesla’s factory, claiming that the automaker wasn’t paying millions in bills.
In this case, Tesla never denied receiving the fuel or subpar service, but it provided a myriad of procedural reasons to explain why it did not pay.
The case was publicized a bit earlier this year, and it was reportedly solved following the publicity.
All these cases are linked to Tesla, but some are pointing out that it is Elon Musk’s modus operandi, as his other companies also have a lot of lien claims against them.
The report found seven companies that filed for bankruptcy after Twitter simply stopped paying their bills after Musk acquired the company.
One of Tesla’s subcontractors said about Musk:
“His goal is to run through everything now – he doesn’t care what or who that impacts – to save the future of the world,” said one entrepreneur about his impression of Musk. He spoke with CNN anonymously and said he remains a fan of Musk but that Tesla has a reputation in Austin of leaving contractors desperate to get paid – noting that his company had to take out extra lines of credit while awaiting payment from Tesla. “Tesla was probably one of the only companies we did business with where it just felt like they absolutely did not care about putting a company out of business.”
In one of the lien cases, Tesla’s own outside counsel agreed that Tesla is not great at paying on time. He said: “I don’t disagree that it does take Tesla some time to pay, that goes for legal bills, too … I know it full well.”
Electrek’s Take
It’s quite something for someone to say that a company “doesn’t care about putting another company out of business by not paying what you owe them” and “I’m still a fan” in the same breath.
The excuse of “saving the future of the world” doesn’t make sense if it also happens to “coincidentally” result in Musk becoming extremely wealthy while his contractors go bankrupt.
If that’s the case, the goal is not saving the future; it’s getting rich.
Regarding the claims in the report, Tesla has a reputation for poor payments. That much is clear when its own outside counsel complains about it in the middle of defending Tesla against claims of not paying its bills.
Some of that is simply due to things slipping between the seat cushions. At any given time, Tesla has about $13 billion in accounts payable.
But it seems to be its way of doing business also because over $100 million in liens in Texas alone is concerning and that’s just for Tesla. Musk has employed a similar approach at other companies, including telling Twitter contractors that they will only pay when forced to.
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