Tesla Motors, Inc. TSLA is under pressure as hundreds of union construction workers have walked out of their job at the battery manufacturing plant in northern Nevada. The workers undertook this step to protest against the automaker’s strategy of hiring workers from outside the state at low wages.
It is estimated that around 350 plumbers, carpenters, electricians, painters and others have walked away from the plant. Among them, around 100 workers have protested outside the factory, stating that Tesla is undertaking an unfair labor practice. The automaker will receive tax incentives of $1.3 billion over a period of 20 years from the state’s government for the construction of the Gigafactory and hiring workers from Nevada. However, the protestors allege that Tesla is not abiding by the terms.
The union officials are not in favor of Tesla contractor, Brycon Corp.’s initiative of hiring workers from Arizona and New Mexico to reduce costs. Tesla, on the other hand, claimed that it is hiring more than 50% of the workers for this contractor and around 75% of the workers for the Gigafactory in Nevada. According to the Governor's Office of Economic Development, the audit report of Dec 2015 depicted that Tesla is complying with the requirement of employing a minimum of 50% Nevadans at its Gigafactory. According to the audit report, Tesla employs 68% workers for its construction work from Nevada.
The incentive deal stated that the electric automaker can hire workers out of the state if enough skilled workers are not available. However, this is not the case, per the protesters. They claim that hiring workers from outside Nevada will save costs for the company as it probably does not have to provide any health insurance and pension benefits.
In order to deal with the shortage of lithium-ion batteries, Tesla is building a Gigafactory in Nevada to produce the batteries in collaboration with various partners. Tesla expects to complete this factory by 2017. The factory will produce enough battery packs to allow the company to build around 500,000 electric cars by 2020. It will also reduce the ‘per kWh’ cost of production of battery packs by over 30%. The automaker expects the factory to provide economies of scale and reduce production costs based on innovative manufacturing techniques, reduced logistics wastes, optimization of co-located processes and lower overhead costs.
Currently, Tesla carries a Zacks Rank #3 (Hold). Some better-ranked automobile stocks include Visteon Corporation VC, Wabash National Corp. WNC and Superior Industries International, Inc. SUP. All three stocks sport a Zacks Rank #1 (Strong Buy).
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